Investors’ mood appeared sour during early trading on Tuesday, as shares of Toyota (TM) traded in the red, despite the Japanese automobile manufacturer launching a new strategic investment unit.
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The unit, armed with $670 million in capital, is the latest in Toyota’s effort to position itself as a mobility company, expanding beyond its traditional automotive business. Mobility companies go beyond vehicles and focus on moving people, goods, energy, and data. They work on automated technologies such as self-driving vehicles and industrial robots, electric bikes, ride-hailing services, and energy systems, among others.
Toyota’s new subsidiary, Toyota Invention Partners, will primarily focus on investments in early-stage startups in Japan, the company noted in a statement. The unit will also offer startups and partners access to Toyota’s manufacturing and talent expertise to help them scale and build.
However, TM stock fell over 2% in early trading on Tuesday to about $192, as of 8:49 a.m. EDT, extending losses from the previous day.
Toyota Doubles Down on Woven Capital
Apart from launching a new investment unit, Toyota also revealed that its growth-stage venture arm Woven Capital, which it now fully controls, has established a second fund with $800 million in capital. The Japanese automaker floated the venture in 2021, with a key focus on investing in companies that advance the mobility sector, including those in AI, automation, and climate technology.
“As Toyota advances its transformation, it is crucial for us to go beyond the Toyota Group itself and work with external partners who bring new businesses and technologies not yet part of Toyota,” said Kenta Kon, Toyota’s chief financial officer.
The launch of the new unit comes as Toyota cut the ribbon on a new test course in Susono City, Japan, last week. The site, which has been dubbed “Toyota Woven City,” was designed as a testing ground for new technologies and to prepare “the future of mobility.” The course was launched five years after Toyota first tinkered with the idea.
Meanwhile, Toyota is also working in partnership with Isuzu Motors (ISUZY) to support the development of fuel cell route buses. These types of city buses are powered by hydrogen instead of diesel, ensuring zero emissions and increased energy efficiency.
These developments come as Toyota, the world’s biggest automobile manufacturer by volume, continues to retain patronage of its vehicles. Worldwide sales of its vehicles rose for eight consecutive months in August, propelled by robust demand in the U.S.
Is TM a Strong Buy?
TipRanks’ AI Stock Analyst rates Toyota shares as Outperform with a score of 83 out of 100, pointing to its strong financial performance and valuation. The average TM price target of $236 indicates a potential 20.14% upswing.
