Soaring material and parts costs offset benefits gained from a plunging Japanese yen and production rebound.  -  IMAGE: Toyota

Soaring material and parts costs offset benefits gained from a plunging Japanese yen and production rebound.

IMAGE: Toyota

Analysts expect Toyota Motor Corp. to report a small quarterly profit increase on Tuesday, with soaring costs of parts and materials nearly offsetting benefits gained from the plunging Japanese yen and a production rebound.

The automaker reported last week that global production rebounded by 30% in the quarter ending in September. But execs warned shortages of semiconductors and other components would continue to constrain output in coming months.

As the auto chip shortage situation improves, it should raise output in the second half of the current fiscal year. But investors’ concerns will shift to the demand outlook, other potential disruptions in the supply chain, and the automaker’s electric vehicle strategy when Toyota reports its earnings.

Toyota is expected to report a 3% increase in July-September operating profit to 772.22 billion yen ($5.3 billion), its highest since the December quarter, according to the average estimate in a poll of 12 analysts by Refinitiv.

This marks the first profit increase in three quarters and a significant improvement from a sharper-than-expected 42% plunge in June quarter profit.

The yen plunged around 30% this year against the U.S. dollar, which boosted the value of Toyota's overseas sales. Toyota adjusted its yen forecast for the year to 130 yen from 115 yen following the first quarter results. But now the currency is trading at around 146 to the dollar.

Soaring input costs have offset the cheap yen. In August, Toyota estimated its material cost for the full year at 1.7 trillion yen, a 17% increase.

Toyota and its major Japanese rivals, Nissan Motor and Honda Motor are also struggling with a slow push into electric vehicles.

Toyota is reconsidering its EV plan to better compete in the EV market just one year into its $38 billion EV plan, Reuters reported earlier this month.

Another setback included a recall of the automaker’s first mass-produced EV after just two months on the market because of safety concerns earlier this year. Toyota restarted taking leasing orders this month.

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