Toyota Motor is poised to announce promising annual earnings, thanks to a surge in demand for hybrid vehicles. 

The Japanese automaker, renowned as the world’s top-selling car manufacturer, stands to capitalize on the growing interest in hybrid technology, even as enthusiasm for battery electric vehicles (EVs) appears to wane.

Bolstered by the depreciation of the yen currency, the company anticipates record results despite facing formidable challenges in key markets.

Toyota confronts intense competition in China amidst a relentless price war, while in the United States, it grapples with the repercussions of consumers contending with heightened borrowing costs. 

Additionally, the company contends with the expanding production of low-priced vehicles by Chinese rivals, posing a significant competitive threat on a global scale.

Toyota has grappled with setbacks, including a safety test scandal at its Daihatsu compact car unit, which has adversely impacted sales in Japan and tarnished the group’s reputation for quality and safety.

Yet, Toyota remains buoyant, having raised its operating profit forecast for the financial year ended March 31 to an impressive 4.9 trillion yen ($31.87 billion). 

Central to Toyota’s success has been its strategic focus on hybrid vehicles, a segment pioneered over a quarter of a century ago with the introduction of the Prius. 

Hybrids, which offer relatively higher margins compared to traditional gasoline cars, accounted for more than a third of the 10.3 million vehicles sold by Toyota in the just-ended financial year, including those under the Lexus luxury brand.

While Toyota has excelled in the hybrid market, it lags behind competitors in the realm of battery electric vehicles. Toyota’s global sales of battery EVs remained modest, comprising just 1 percent of total sales in the previous year, significantly below its initial target.

The company’s success in crucial markets like China hinges on its ability to refine its EV strategy and deliver compelling offerings tailored to local preferences. With Chinese consumers increasingly favoring software-rich vehicles, Toyota faces the imperative to enhance its software capabilities to remain competitive in the evolving automotive landscape.

Toyota’s performance in the United States presents a more positive outlook, with sales witnessing a notable increase of 20 percent to 565,000 vehicles over the same period, reflecting the company’s enduring appeal in key markets.