Toyota Investing Rs.3 Billion for the Local Production of Automobile Parts!

As reported last week, Toyota IMC’s board gave the nod for a whopping investment of around Rs. 3 Billion. What’s it for? Well, they’re keen on localizing more of their vehicles’ parts and components. You know, the stuff that makes your car tick.

Why? It’s all part of Toyota Pakistan’s grand plan to cut down on foreign exchange outflow and give our local industry a bit of a boost.

Now, where’s that investment going? Plant and machinery, molds, dies, equipment—you name it. But don’t hold your breath; this investment venture will take its time, wrapping up around the third quarter of 2025.

So, what’s in it for you, you might wonder? The hope is that the cost of making those specific car parts will shrink thanks to this investment in localization, maybe even reflecting a drop in prices for those parts (after sales) and the vehicles themselves. Fingers crossed!

Toyota Posted 4.95 Billion Profit in 1st Half of FY24

Hold onto your seats for more Toyota news! In the first half of fiscal year 2024, they raked in a staggering profit of 4.95 Billion rupees, marking an 89% increase compared to the same period last year. Talk about a profit boost!

Even more surprising, the second quarter of FY24 brought in a profit of Rs. 1.74 billion, a solid 31% YoY increase. To celebrate, Toyota decided to share the joy with a cash dividend of Rs. 13.2 per share (Rs. 37.70 per share in 1HFY24).

But, and there’s always a but, Toyota’s vehicle sales took a bit of a hit, dropping by around 40% in the second quarter compared to the first quarter of FY 2024.

Diving into the numbers, net sales during 1HFY24 hit around Rs. 50.910 billion, a hefty 41% dip compared to the same period last year. Also, during 2QFY24, net sales took a nosedive, decreasing by 63% YoY and 44% QoQ. Why? Blame it on lower volumetric sales, especially the significant drop in Fortuner and Hilux sales (down by 83% YoY).

Here’s another thing: Toyota’s vehicle sales took a nearly 44% nosedive in the second half of 2023 (1HFY24) compared to the first half of 2023 (2HFY23).

In terms of gross margin, Toyota went from a -3.3% last year to a 9.3% in 1HFY24. That’s quite the makeover!

Distribution expenses have soared by 94% YoY settling at 654 million during 2QFY24. Blame it on the upswing in marketing expenses, especially tied to the Corolla Cross.

Conclusion

The overall sales of Toyota took a dip in the 2nd quarter of fiscal year 2024. What’s interesting is that profits showed improvement in the same quarter, even with the sales going down. Toyota isn’t sitting idle, though, they are actively investing more in the localization of vehicle parts and components now. This strategy might help in reducing production costs and, ultimately, could allow the company to cut down on the prices of vehicles in the future. Let’s stay optimistic!

Do you think that the prices of Toyota vehicles will be decreased after more localization of the parts? Share your thoughts in the comment section below.