Toyota braces for U.S. trade tension, raises profit forecast
Toyota raised its full-year forecasts — albeit falling short of analysts’ estimates — as the carmaker sought to navigate rising protectionism under U.S. President Donald Trump and as the yen’s volatility weighed on prospects for exports of its Prius and Lexus models.
Operating profit will probably be 1.85 trillion yen (US$16.4 billion) in the year through March, up from its previous forecast of 1.7 trillion yen but about 10 per cent lower than what analysts projected. The automaker on Monday reported a 39 per cent decline in third-quarter operating, also missing estimates.
Even with the benefits of a weaker yen boosting repatriated profits, Toyota must contend with possible trade tensions after Trump criticized the automaker’s plans to build a Corolla plant in Mexico.
The attack broadened with Trump rebuking Japan for sending the United States hundreds of thousands of cars from what he said were “the biggest ships I’ve ever seen” while American carmakers struggle to sell their vehicles in Japan.
“It’s difficult to give any impact forecast from Trump’s administration at this point,” Tetsuya Otake, a Toyota managing officer, said in a briefing in Tokyo on Monday. “Toyota will co-operate with its group as it watches the moves from Trump’s administration.”
Toyota exports more vehicles to the United States than its two largest Japanese peers, Nissan and Honda. The carmaker makes most of the Lexus luxury cars in Japan even as the U.S. is the brand’s largest market. It does make the Lexus RX 350 sport utility vehicle in Cambridge.
Toyota also ships the Tacoma pickup trucks from Mexico to the U.S. In comparison, most major carmakers produce the majority of the vehicles sold in China locally, due partly to the tariffs China levies on car imports.
Japanese carmakers face a “significantly greater risk” from frictions over the trade imbalance with the U.S. than from revisions to the North American Free Trade Agreement with Mexico and Canada, Takaki Nakanishi, an analyst at Jefferies Group, wrote in a report last month.
Prime Minister Shinzo Abe met with Toyota president Akio Toyoda on Friday, where they discussed current affairs, according to the automaker chief.
Abe, who is scheduled for a summit with Trump in Washington on Friday, told the U.S. leader in a phone call that 75 per cent of parts in the Toyota Camry model sold in the U.S. are made locally, which is a higher proportion than the “Big Three” U.S. manufacturers.
Toyota will invest $10 billion in the U.S. over the next five years, maintaining its pace of spending during the past half decade, joining other manufacturers in highlighting projects in response to pressure from Trump to create jobs in America.
The spending includes a $600 million investment to expand its Indiana plant, adding 400 jobs, the carmaker said last month.
Toyota last year lost its global No. 1 sales title to Volkswagen.