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Toyota gets back on the fast lane

Publication Date : 07-11-2012


Even Toyota Motor Corp. executive vice president Satoshi Ozawa seemed surprised by the rapid turnaround in the automaker's fortunes.

"The results were beyond our real ability," Ozawa said at a press conference in Tokyo on Monday.

His comments came after Toyota raised its group operating profit forecast for the year through March 2013 to above 1 trillion yen for the first time in five years. Toyota's first-half earnings were buoyed by a jump in demand generated by a government subsidy programme for eco-friendly vehicle buyers.

Domestic operations boosted by the government subsidies enabled the company to hike its profit target for the year to March 2013. For the April-September period, industry-wide domestic auto sales, which exclude minicars, rose 29 per cent from the same period last year, while Toyota's domestic sales jumped about 55 per cent. Its strong lineup of fuel-efficient vehicles--headlined by the Aqua and Prius hybrid models--helped Toyota gain a significant lead over its rivals.

"We received a tailwind from stimulus measures" implemented in Japan, emerging economies and other countries, Ozawa said.

Nonconsolidated earnings for domestic businesses hampered Toyota's group recovery efforts after the so-called Lehman shock in 2008. But the latest nonconsolidated half-year results through September for the sector helped the company emerge from the red ink it had posted for three consecutive years.

Toyota also logged brisk sales in North America and Southeast Asia, which have traditionally been strongholds for the automaker. In North America, Camry and Corolla cars sold well after new models were added to Toyota's flagship lines. In Thailand and Indonesia, the Innovative International Multi-purpose Vehicle (IMV) series, intended for emerging markets, proved popular.

Sharing the same chassis to produce a wide variety of models, including pickup trucks and sport-utility vehicles, helps make the IMV series profitable.

China risks likely to hit

Despite the rosy figures, uncertainties remain in the second half of the fiscal year.

In China, Japanese automakers are faced with the slowdown in the Chinese economy as well as a boycott of Japanese cars triggered by tensions over the Senkaku Islands. Toyota's sales in China dropped more than 40 per cent year on year in September and October. The company expects sales in China from October to March will be 200,000 units fewer than its initial estimate, a drop that will lower its full-year post-tax profit by 30 billion yen.

However, Toyota's China sales accounted for about 12 per cent of its total sales last year in terms of units. This figure is lower than that of rivals Nissan Motor Co. (about 27 per cent), Honda Motor Co. (about 20 per cent) and Mazda Motor Corp. (about 18 per cent). Consequently, China's downside risk is expected to be limited for Toyota.

But the end of the government's subsidy programme for eco-friendly vehicles and the economic slowdown at home and abroad are likely to dent the auto industry. "It's extremely difficult to make projections," Ozawa said.

Many potholes lie ahead for Toyota as it aims to record a group operating profit of more than 1 trillion yen.


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