Toyota is expected to report its first increase in operating income in six quarters, supported by a weaker yen and strong demand for its higher-margin hybrid vehicles, despite declining sales in China and the Middle East.

The Japanese automaker’s operating profit for the July-to-September quarter is forecast to rise 18 per cent to 992 billion yen, equivalent to 6.3 billion dollars, according to the median estimate of nine analysts surveyed by LSEG.

Revenue is also expected to increase by eight per cent to 13.4 trillion yen.

The anticipated improvement comes as Toyota benefits from stronger demand for fuel-efficient hybrid vehicles, particularly in North America, as well as the absence of United States tariff-related costs that weighed on earnings during the same period last year.

However, the world’s largest automaker recorded a four per cent decline in global sales of Toyota and Lexus vehicles to just over 2.5 million units during the quarter.

Sales in China fell by 22 per cent, while deliveries in the Middle East dropped by about a third.

In contrast, sales of higher-margin electrified vehicles in North America increased by more than 30 per cent to nearly 430,000 units, although overall vehicle sales in the United States grew by less than one per cent.

Analyst at Marusan Securities, Yuya Takahashi, said rising gasoline prices were driving demand for more fuel-efficient hybrid vehicles, adding that the volume of profitable hybrid sales would be crucial to Toyota’s performance.

Competition in China, the world’s largest automobile market, remains a major concern for investors as domestic manufacturers expand their electric vehicle offerings, challenging Toyota’s gasoline-powered and hybrid-focused lineup.

The pressure has also affected automotive suppliers. Denso reported a decline of more than one-third in operating profit in Asia for the six months through September, citing weaker vehicle sales in China and higher material costs.

Investors are also expected to assess Toyota’s increasing investments in factory automation, vehicle software and autonomous driving technology.

The company estimates that modernising its factories through greater automation and robotics deployment could cost about one trillion yen annually from 2028. (Arise News)