Toyota stock price hits record high as Tesla, Nio, Xpeng nosedive

Toyota (NYSE: TM) stock price has surged to a record high even as most EV companies like Tesla, Nio, and Xpeng are languishing. The shares have risen in the past two straight weeks and moved to its highest point on record, valuing the Japanese automaker at over $268 billion. They have soared by over 60% from their lowest level in 2022.

Tesla, in contrast, has plunged by over 50% from its all-time high and over 25% this year. Other EV stocks like Nio, Xpeng, Lucid, and Rivian have also plunged, costing investors billions of dollars.

Tesla vs Toyota vs Xpeng vs Nio

ICE and EV divergence

The automobile industry is changing dramatically. A good example of this is in the number of automakers that exist today. In the past, the sector was dominated by a few companies like Toyota, Ford, GM, and Stellantis. Today, there are hundreds of companies, mostly from China, with BYD being the fifth-biggest company in market cap.

The other big shift that is going on is on electrification. Most traditional companies have moved to electrifying their vehicles as they target Tesla, the biggest company in the world. Renault started Ampere while Volvo created Polestar for this. 

Toyota, on the other hand, has embraced a more moderate tone in this transition. While the company has announced plans to create EVs, it has focused mostly on its Internal Combustion Engine (ICE) vehicles and hybrids. It has also spent billions of dollars creating battery technologies to solve some of the biggest challenges in the industry.

There are signs that Toyota’s approach is paying off as its numbers have continued rising. The company’s results published on Tuesday revealed that its Q3 profit jumped to ¥1.36 trillion in the last quarter. This is equivalent to $9 billion. The company also raised its full-year revenue guidance to $294 billion and its profit to be over $30 billion. It expects to sell over 9.45 million vehicles.

Why Toyota is winning vs EVs

To be clear. Toyota is not the only ICE company that is doing well. Fellow Japanese automakers like Mazda, Subaru, and Honda Motor are either trading at their all-time highs or nearing these levels. Similarly, GM and Ford have also bounced back sharply from their lowest levels this year.

There are a few reasons why Toyota is winning. First, Toyota is known for making high-quality vehicles that are well-known around the world. Its vehicles are known to last longer than most vehicles.

Second, demand for hybrid vehicles is rising around the world, as the WSJ wrote recently. Hybrid vehicles are known for their efficiency and low fuel consumption. Toyota builds some of the most popular hybrid vehicles in the world.

Third, Toyota is known for taking its time before launching a product. In this case, the company is waiting to launch its solid-state batteries before fully embracing EVs. 

On the other hand, EV sales growth has weakened, the charging infrastructure is not all that efficient, and most customers still have range anxiety. Most importantly, EVs are still more expensive than ICE vehicles.

Therefore, as the EV bubble pops, there is a likelihood that Toyota will continue doing well in the long term.