Toyota Motor Corp. is planning to double its return on equity to 20% as Japan’s largest automaker shifts focus toward software services and recurring revenue streams, Nikkei reported.
The target, revealed by a company executive who requested anonymity, would put Toyota ahead of most global rivals including Tesla Inc. and match the profitability of China’s BYD Co. To achieve this ambitious goal, Toyota would need to boost its net profit to 6 trillion yen ($38.7 billion) from last year’s 4.94 trillion yen.
The automaker is expanding beyond traditional vehicle sales into software-defined cars that can receive wireless updates. This includes enhanced safety features and automated driving capabilities. Toyota’s after-sales services, including parts, inspections and financing, are already generating additional profits of more than 100 billion yen annually.
The company has also increased its share buyback program by 20% to 1.2 trillion yen through April 2025, responding to financial institutions reducing their holdings. Last fiscal year’s dividend payments topped 1 trillion yen.
The move could pressure other Japanese firms to improve capital efficiency, as the average ROE for listed companies in Japan hovers around 9%. Toyota’s own ROE has fluctuated between 9% and 16% in recent years.
