Toyota, Honda to trim costs to free up cash for new tech
TOKYO: Two top Japanese automakers said they planned to tighten their belts in the years ahead to free up cash to develop electric cars and ride-sharing services, underscoring the hard task ahead as traditional carmakers face a rapidly changing industry.
Toyota Motor Corp, the country’s top carmaker, said that higher costs to develop new technologies like connected cars was ramping up pressure to generate savings wherever possible, while Honda Motor Co said it would strip down its vehicle lineup to cut production costs.
“We still weren’t able to improve our costs enough last year,” Toyota CFO Koji Kobayashi told reporters, adding that mounting investment required for new technologies and other R&D costs was making costcutting efforts more challenging.
“We need to work to find new ways to reduce costs this year,” he said, adding that penny pinching would apply to all aspects of the business, from producing lowercost prototypes to limiting the number of pencils employees use at any given time.
Honda CEO Takahiro Hachigo said Japan’s No. 3 carmaker would cut the number of car model variations to a third of current offerings by 2025, reducing global production costs by 10 per cent and redirecting those savings toward advanced research and development.
“We recognise that the number of models and variations at the trim and option level have increased and our efficiency has declined,” he told reporters at a briefing. Toyota expects cost reduction efforts will help to lift operating profit by 3.3 per cent to 2.55 trillion yen (RM97.4 billion) in the year to March 2020. In the year just ended, Toyota posted an operating profit of 2.47 trillion yen.
The profit outlook for one of the world’s biggest car makers was slightly lower than the 2.61 trillion yen average of 23 analyst estimates compiled by Refinitiv. Toyota also announced a 300 billion yen share buyback.
Honda forecast cost reductions would help boost operating profit by six per cent to 770 billion yen in the year to March. That is less than the 834 billion yen average of 22 analyst estimates compiled by Refinitiv.
Toyota expects to sell a record 10.74 million vehicles globally in the current year, up 1.3 per cent on the year and lifted by higher sales in Asia as it continues to grow sales in China despite an overall slowdown in the world’s biggest auto market.
But sales in North America are expected to struggle for another year due to weak US demand for its marquee sedan models such as the Corolla and the Camry as drivers continue to shift to larger, higher-margin trucks and SUVs. Toyota expects sales in the region to slide 1.6 per cent.
Kobayashi said Toyota wanted to raise its operating margin in North America to eight per cent in 2020, in line with the global margin, from around 1 per cent, but acknowledged it was not confident of meeting the target.
To do so, the carmaker would need to further ramp up its sales ratio of SUVs and trucks from around 60 per cent of total vehicle sales in 2018 and slash discounting, he said.
Toyota, Honda and their rivals are facing stiff competition as ride-sharing technology and the race to develop self-driving cars has caused rapid - and costly - disruption to the auto industry.
We still weren’t able to improve our costs enough last year. We need to work to find new ways to reduce costs this year.