Toyota Doubles-Down On The EV Market, Again

Toyota Is Gearing Up For A Big Move

With OEM auto manufacturers and start-ups around the world ramping production of electric vehicles, it is no surprise to hear Toyota (NYSE:TM) is doing the same. Recently criticized for its focus on hybrid vehicles, the company is shifting that focus to battery-electric vehicles with the launch of new models.

What is a surprise is the speed at which Toyota plans to make this move. The company is already a lead in the hybrid/BEV market and says it’s going to launch three new models this year alone, with more on the horizon. Two of the models will be pure BEV and rechargeable via external means. One of the models will be a PHEV or Plug-In Hybrid Electric Vehicle, a hybrid whose battery can also be charged via external means. The goal? For EV to account for 25% of sales by 2025 and 70% by the end of the decade.

"We believe the fastest way to lower greenhouse gases in the transportation sector is to offer drivers lower carbon choices that meet their needs," says Toyota Research Institute CEO Gill Pratt. "At every price point and with multiple powertrains, we can put more people in cleaner automobiles across North America to have the greatest near-term impact on total carbon emissions,"

What he doesn’t say is that the EV market is growing at a high double-digit CAGR and the estimates are accelerating. That alone is enough for any OEM to want in on EV and that goes doubly for market-leader Toyota. Toyota Motor North America has 40% of the total NA market share in alternative fuels including healthy portions of both the fuel-cell and hybrid/battery markets.

 Toyota Beat Consensus And Raised Guidance

Auto sales are down globally due to the pandemic but two things are clear in the Toyota sales figures. The first is that sales did not decline as much as first thought, the second is that the rebound is much stronger than previously estimated. The company’s 3rd quarter revenue shows not only sequential gains from the FQ1/calendar Q2 lows but a YOY acceleration as well.

The company’s net consolidated revenue jumped 7.1% in the quarter to beat the consensus by 760 basis points and negating an expected decline. Net income increased by 14%  and the guidance for next quarter is positive. The company is expecting to sell roughly 7.6 million in the fiscal year ending March 2021, up from the 7.5 million last forecast, and this could be a cautious outlook.

The Chinese Passenger Car Association says total sales in China grew 25.7% over last year to set the fastest pace since 2016. The salewere led by electric vehicles which surged 281% from the prior year. Competitor Nissan Motors revealed its sales in China grew 25% for the month, there is no word yet out of Toyota. If the rest of the world follows in China’s footsteps car sales in the first half of calendar 2021 could be robust.

The Technical Outlook: Toyota Looks Ready To Pop

Aside from the choppy nature of Toyota’s price chart, a result of its being traded in so many different time zones, the stock looks ready to pop. The price action has been ratcheting steadily higher along with the global rebound in auto sales and the latest is very bullish. Prices popped in the wake of the Q4 release and are now consolidating near the recent highs and above the mid-point of the February 10th Long-White-Candle. With car sales on the rise and the indicators bullish the consolidation may turn into a bullish Flag Pattern. If so, a break to the upside bould result in a move worth $20 or about 12.5% of upside.