24/7 Wall St. Insights
- Toyota Motor Corp. (NYSE: TM) stock has underperformed the S&P 500 this year.
- Will buying back shares offer a boost, even as the company falls behind rivals?
- Also: Two dividend legends to hold forever.
What a difference a few months makes. Early this year, Toyota Motor Corp. (NYSE: TM) became the most widely admired global car company as it stayed with hybrids to draw “green” drivers, while its competition spent billions of dollars on electric vehicles (EVs) that did not sell well. Toyota already had the top-selling hybrid in the world, the Prius, which had impressive sales for decades. Its stock price increase has softened, and it has turned to a share buyback to support it.
According to Reuters, Toyota’s planned share buyback through April will be $8.31 billion, up from about 85% of that. Its shares are flat this year. The S&P 500 is up 20%, and General Motors Co. (NYSE: GM) shares are 33% higher.
Is Toyota Falling Behind?
A significant pressure on Toyota is China. Most international car companies have sales declines there, along with what used to be substantial profits. Several local companies, led by BYD, have most of the market share in the EV segment, which is the market’s fastest-growing segment by far.
Another disadvantage Toyota has is in advanced auto software. The Financial Times reports, “The latest ranking of auto groups’ digital performance from consultancy Gartner shows only three legacy carmakers — Ford, GM and BMW — make it to the top 10 while the rest are dominated by Nio, Xpeng and BYD from China and US start-ups including Tesla, Rivian and Lucid.” Notably, the world’s two largest car companies by revenue, Toyota and Volkswagen, did not make the list.
Most experts believe that the future of the auto industry will be determined by EV sales and the software used in new features, which include self-driving cars. If Toyota is behind in these, its stock price will continue to suffer.
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