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Here’s What Toyota (NYSE: TM) Is Worried About

Story Highlights

According to a top Toyota Motor executive, rising raw material costs, weak public charging facilities, and high sticker prices plague the EV industry outlook.

Japanese auto giant Toyota Motor (NYSE: TM) does not seem to be very optimistic about the demand trend in the electric vehicles industry. Jack Hollis, the Executive Vice-President of Sales at Toyota Motor North America, has recently cautioned that car buyers might prefer hybrid vehicles more and slowly switch to completely electric vehicles (EV) in the near term, according to a Wall Street Journal report.

According to the report, Hollis said, “As much as you want to talk about EVs, the marketplace isn’t mature enough.” He added, “I don’t think the market is ready for what the rhetoric is saying.” 

Going by the statistics, the United States has nearly 124,000 public chargers that take long hours to charge, the report stated.

Another WSJ report states that the U.S. government is currently aiming at raising this number to 500,000 public chargers by 2030; however, McKinsey & Co. projects a requirement of 1.2 million for the same. Also, high sticker prices are plaguing the industry.

Moving on, surging raw-material costs, including the minerals like lithium and cobalt, are weighing on the EV industry outlook.

According to a report published by The Hill, Sam Abuelsamid, the Principal Analyst of e-mobility research at Guidehouse Insights, said, “Over the last two, three years, as the demand for EVs has grown dramatically, particularly in China and Europe and more recently here in North America, the demand for lithium has exploded and so have the prices.”

He also mentioned that Russia’s invasion of Ukraine has impacted the supply of nickel and has contributed to the rising prices.

Meanwhile, the passage of the Inflation Reduction Act can put Toyota Motor in a disadvantageous position in comparison to peers within the EV industry. The company’s vehicles might not qualify for a tax credit, largely due to the restrictions on battery and mineral procurement, assembly of the EV, income, and price caps.

Should You Buy Toyota Motor Stock?

As of now, analysts have mixed feelings about the stock. On TipRanks, they are cautiously optimistic about TM, which has a Moderate Buy consensus rating based on one Buy and one Hold. Toyota Motor’s average price target of $189.71 implies 19.2% upside potential. American depositary receipts of the company have lost about 14.6% year-to-date.

Interestingly, financial bloggers are 100% Bullish on TM stock, compared to the sector average of 66%. Further, Toyota Motor scores an eight out of 10 on TipRanks, indicating that it has strong potential to outperform the market.

Final Thoughts

Challenges highlighted by the Toyota executive hold potential. However, in order to counter the lingering concerns, some automobile makers are trying to procure minerals locally and invest in mining operations in the United States.

Read full Disclosure.

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