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Toyota expects profit jump through strengthened cost management

  • May 8, 2019
  • , Kyodo News , 7:55 p.m.
  • English Press

Toyota Motor Corp. on Wednesday projected a 19.5 percent rise in net profit for the current fiscal year, expecting its accelerated cost reduction efforts to offset the impact of increasing research spending and a lower average price of vehicles it plans to sell.


Toyota projects a group net profit of 2.25 trillion yen ($20.4 billion) for the business year through March 2020, up from 1.88 trillion yen the previous year, hoping to counter the expected negative effect of a stronger yen by cutting such costs as sales promotion in the U.S. market.


Group net profit in the just-ended fiscal year represents a 24.5 percent fall partly due to a drop in the value of stocks that it holds.


The company reported a 2.9 percent growth in group sales to 30.23 trillion yen for the year ended March on brisk sales in China, becoming the first Japanese company to book more than 30 trillion yen in sales.


“The earnings results reflect Toyota’s capability. In the past year we made aggressive investments for the future” while implementing changes within the corporate group to adopt to the evolving conditions of the auto market, Toyota President Akio Toyoda told a press conference.


In terms of sales, Toyota ranks 8th among the world’s listed companies, just behind Volkswagen AG, according to data compiled by Nomura Securities Co. based on average foreign exchange rates during the year through March 2019.


Toyota expects a profit rise despite growing uncertainties over the U.S.-China tariff war and trade talks between Tokyo and Washington in which Japan’s automobile exports to the United States is a key topic.


“We have not factored in the impact (from possible trade talk outcomes) in the business year 2019 forecast as we still don’t know how it will turn out. We can only say we are watching the developments closely,” Senior Managing Officer Masayoshi Shirayanagi told reporters.


Concerns over the China-U.S. trade dispute were reignited with U.S. President Donald Trump’s abrupt announcement Friday that he is set to raise tariffs on $200 billion worth of Chinese imports.


For the current year, group sales are projected to slip 0.7 percent to 30.00 trillion yen. Operating profit is seen rising 3.3 percent to 2.55 trillion yen from 2.47 trillion yen last fiscal year, which represented a 2.8 percent rise.


Toyota also said that it has earmarked a record 1.1 trillion yen for research and development spending to enable to it to keep investing aggressively in next-generation technologies as the auto industry faces a transition period with innovations in the form of CASE — connectivity, autonomous driving, sharing and electrified powertrains.


“I would like to strengthen coordination not only with Toyota group companies but also with other car manufacturers,” Toyoda said. The automaker has already tied up with technology groups such as SoftBank Corp. and U.S. ride-hailing giant Uber Technologies Inc.

“In pursuing such initiatives, I believe that the road will open up to us towards becoming a mobility service platform provider which is the business model that we are aiming for,” he said.


Toyota plans to sell a record 10.74 million vehicles worldwide in the current fiscal year, compared with 10.60 million in fiscal 2018, a gain of 1.6 percent from fiscal 2017. The sales figures include vehicles sold by its subsidiaries, small-car manufacturer Daihatsu Motor Co. and truck maker Hino Motors Ltd.


In the U.S. market, Toyota hopes to boost sales of sport-utility vehicles that are gaining popularity, Koji Kobayashi, executive vice president, told the press conference.


As for China, the world’s largest auto market, Kobayashi said, “There may be twists and turns, but the number of consumers is expected to increase in China even as there are U.S.-China trade frictions. We aim to slowly but steadily improve sales there,” Kobayashi said.


The company expects the dollar to average 110 yen this fiscal year, compared to 111 yen the previous year. A stronger yen dents profits earned overseas when repatriated and undermines the price competitiveness of Japan-made vehicles overseas.

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