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Erste Group cuts Toyota stock to 'Hold' amid safety test issues

EditorEmilio Ghigini
Published 06/14/2024, 07:37 AM
© Reuters.

On Friday, Erste Group revised its rating for Toyota Motor (NYSE:TM) stock, moving from Buy to Hold. The shift in stance comes despite the automaker's positive financial performance in the final quarter of its 2024 fiscal year, which spans from January to March 2024. Toyota saw its operating margin improve to 10.1%, a significant increase from the 6.5% reported in the corresponding quarter of the previous year.

Toyota's revenue and profit trajectory maintained an upward trend during the last quarter. The company has also announced an ambitious plan to introduce 10 new battery-electric car models by 2026, alongside a new production strategy aimed at significantly reducing manufacturing costs for vehicles sold from that year onwards.

However, the downgrade by Erste Group is attributed to recent controversies surrounding Toyota. The company has faced issues with manipulations concerning missing safety tests. Affected models, which include the Corolla Fielder, Corolla Axio, and Yaris Cross, are currently still on sale but have had their sales suspended due to these revelations.

The halt in sales of these models comes as a response to the discovery of the aforementioned manipulations. This development poses a challenge for Toyota, which has been working on strengthening its product lineup with a focus on electric vehicles as part of its future strategy.

The automotive industry closely monitors such ratings changes, as they often influence investor sentiment and can impact a company's stock performance in the markets. Toyota Motor's adjusted rating reflects the analyst's view of the company's current position and the potential risks associated with the safety test manipulations.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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