Leading international automakers Toyota, Honda and BMW have reported significant drops in quarterly profits, primarily due to mounting challenges in the Chinese market. The world’s largest automotive market has become increasingly competitive as domestic manufacturers gain substantial market share.
Toyota, the world’s largest carmaker by sales, witnessed its operating profit decline by 20% to ¥1.16tn ($7.5bn) in the September quarter, marking its first drop in two years. The Japanese manufacturer was compelled to lower its annual vehicle sales target to 10.8 million units from 10.9 million, though it maintained its full-year profit guidance. Sales in China for Toyota and its luxury brand Lexus fell 9.7% to 456,000 vehicles.
Honda’s situation mirrors these difficulties, leading to a 14% reduction in its net profit outlook to ¥950bn. The announcement triggered a 6% drop in Honda’s share price, whilst Toyota’s shares managed a modest 1.7% gain due to maintained profit guidance.
BMW reported equally concerning figures, with earnings before interest and taxes plummeting 61% year-on-year to €1.69bn. The German luxury carmaker experienced a dramatic 30% decline in Chinese vehicle sales, causing its automotive division’s operating margin to shrink from 9.8% to 2.3%. This news prompted a 5% fall in BMW’s share value.
The challenging landscape extends beyond these manufacturers, with Volkswagen recently announcing a 64% decrease in quarterly net profits. The surge of local electric vehicle manufacturers, particularly BYD, combined with cooling consumer demand following China’s property crisis, has created a perfect storm for international automakers.
Despite these headwinds, Toyota executives remain optimistic about hybrid vehicle demand in North America, reporting record sales of 524,790 units. The company maintains that low inventory levels, rather than demand issues, are constraining sales numbers in this crucial market.
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