Categories Analysis, Consumer

Why Toyota Motor stock turned costlier?

Toyota Motor Corporation (NYSE: TM) stock turned costlier after hitting a new yearly high of $135.96 on Wednesday. Investors believe that the company’s future looks robust after an 11.3% growth in vehicle sales for the month of August. The Japanese automaker experienced growth in vehicle sales from its Toyota and Lexus divisions.

The automotive industry is facing a time of profound transformation in response to significant technological innovation such as electrification, automated driving, and connected vehicles. The market penetration varies and remains unclear after considering the types of electrified vehicles such as hybrid, plug-in hybrid, electric, and fuel cell vehicles.

In 2019, the global automotive industry is expected to begin a challenging phase, with multiple obstacles. China faced its first even decline in vehicles sales in over 20 years, the USA market grew marginally, the shockwaves of Brexit and new United States-Mexico-Canada Agreement (USMCA) are expected create across global markets, and the new US-China trade war. This is expected to play out till 2020 at least with global markets expected to rebound by around 2023.Toyota has set a target commencement date for mass production of electric vehicles in 2020, starting in China, for a launch date of all vehicle models with electrified grades by around 2025. The annual sales of electric vehicles are expected to amount to over 5.5 million total units or more than 50% of annual aggregate vehicle sales by 2030.

The company is likely to strengthen its capabilities in research and development as well as production and technological development for the advancement in electric vehicles. In the midst, Toyota is expected to effectively manage capital expenditures for the entire business to minimize unnecessary spending, in order to focus on investments in strategic areas that are likely to contribute to future competitiveness and growth.

Read: Will Tesla stock continue to fall on tariff uncertainty

For the first quarter, Toyota reported a 3% increase in earnings helped by higher revenue. Despite the growth in consolidated vehicle sales, the automaker witnessed a decline in vehicle sales across North America and other regions. The company had cash and cash equivalents of $34.5 billion as of June 30, 2019, while the long term debt stood at $95.4 billion.

For fiscal 2020, Toyota expects consolidated vehicle sale of 9 million units, unchanged from the previous forecast. Further, the company projects consolidated net revenues of $268 billion, operating income of $21.8 billion, and net income of $19.5 billion.

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