Toyota Shares Rise on Report of 20% Return on Equity Target
Toyota shares rose 4.6% on Wednesday and 6% on Thursday following reports that the automaker is targeting a 20% return on equity (ROE) by around 2030. According to a report from a leading financial publication, a Toyota executive discussed the need to achieve a stable 20% ROE to maintain global competitiveness, although the timing of achievement was not specified.
Toyota highlighted during its second-quarter earnings briefing that expanding value chain earnings, such as post-sale software services, would be crucial to hitting this benchmark. Analysts at Morgan Stanley noted the importance of “rebuilding the business model” to include revenue streams like software updates and auxiliary services, as well as capital efficiency improvements.
Bank of America analysts emphasized the potential for Toyota to benefit from growth in its financial and parts divisions, comparing the strategy to General Electric’s success in its finance and maintenance businesses. They also highlighted Toyota’s shift toward a mobility-focused business model, leveraging software and services to enhance profitability.
The analysts will be watching whether the Woven City disclosure expected at January’s CES 2025 represents a contribution to ROE targets, and will also be looking for further governance enhancements at Toyota’s June 2025 annual general meeting to bolster shareholder confidence.
