Column: Japan players are booking hybrid profits today to invest in EVs tomorrow

TOKYO — If it takes money to make money, Japanese automakers are sitting pretty these days.

As the country's carmakers wrapped their fiscal third-quarter earnings season last week, many booked a banner quarter and even raised their already robust fiscal-year forecasts.

Some, including Toyota, Honda and Mazda, are zeroing in on record returns.

The plump profits matter because the money will help fund their shift to electric vehicles.

Japanese automakers, especially Toyota, were once castigated for being late to the EV party as rivals around the world plied billions of dollars into the nascent technology and EV factories.

Now, however, market confidence in the meteoric rise of EVs is losing steam.

Instead of looking late on EVs, Japanese automakers look like they might be right on time.

Toyota, Honda, Subaru and Mazda are furiously developing cutting-edge next-generation EVs.

That new wave of battery-powered cars will arrive in the second half of the decade, when Japanese carmakers say EV demand will really take off. The EVs, they say, will be world-class competitors leveraging new manufacturing techniques and maybe even solid-state batteries.

In the meantime, Japan's carmakers are busy cashing in on their transition lineups.

Toyota and Honda are getting a big boost from their signature hybrid vehicles.

Toyota said last week it expects record operating profit of ¥4.90 trillion ($34.76 billion) in the current fiscal year ending March 31. That is almost double the previous year's haul.

Toyota's net income is also seen rocketing to a new record. The outlook: ¥4.50 trillion. That's around $31.92 billion, more than double the combined net booked by Ford and General Motors.

In Toyota's latest quarter, it delivered an amazing 14 percent operating profit margin.

Hybrids are setting the pace. And investors have shown their support for Toyota's roadmap by boosting the company's share price some 26 percent since Jan. 1.

Honda also says hybrid revenue is key to bankrolling tomorrow's EVs. Japan's No. 2 carmaker just unveiled a new line of EVs for the U.S. But they won't start landing until 2026. That rollouot would benefit from Honda delivering on its forecast for record operating profit this fiscal year.

Mazda also targets records profits. And those will be essential to bolstering the company's near-term "net worth" as it spends to electrify its lineup, CFO Jeffrey Guyton said.

Mazda's transition is already leaning heavily into plug-in hybrids and getting good uptake.

Subaru, which has only one EV in its lineup, wants half its global volume from EVs in 2030.

Good thing, then, that the small-sized niche player is on track to deliver its biggest fiscal year profit in almost a decade. Subaru is boosting R&D spending 25 percent this year and also investing big-time to retool its domestic production base to churn out EVs.

Two Japanese players that didn't fair as well in the October-to-December quarter: alliance partners Nissan and Mitsubishi. Both were thin on hybrids and also thin on profits.

Japan's strategy of building a hybrid bridge to the EV future is derided in some circles. But as the recent financial results show, hybrid profits today may help power EV sales tomorrow.