Toyota braces for US trade tension, raises yearly profit forecast
TOYOTA raised its full-year forecasts – albeit falling short of analysts’ estimates – as the car maker sought to navigate rising protectionism under 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 ( RM74 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 Toyota City, Japan-based auto maker last Monday reported a 39 per cent decline in thirdquarter operating, also missing estimates.
Even with the benefits of a weaker yen boosting repatriated profits, Toyota must contend with possible trade tensions after Trump criticised the auto maker’s plans to build a Corolla plant in Mexico. The attack broadened with the US leader rebuking Japan for sending the US hundreds of thousands of cars from what he said were “the biggest ships I’ve ever seen” while American car makers 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 cooperate with its group as it watches the moves from Trump’s administration.”
Toyota exports more vehicles to the US than its two largest Japanese peers, Nissan and Honda. The car maker makes most of the Lexus luxury cars in Japan even as the US is the brand’s largest market. It also ships the Tacoma pickup trucks from Mexico to the US In comparison, most major car makers produce the majority of the vehicles sold in China locally, due partly to the tariffs China levies on car imports.
Japanese car makers face a “significantly greater risk” from frictions over the trade imbalance with the US 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 Feb 10, told the US leader in a phone call that 75 per cent of parts in the Toyota Camry model sold in the US are made locally, which is a higher proportion than the ‘Big Three’ US manufacturers.
The yen has weakened about
It’s difficult to give any impact forecast from Trump’s administration at this point. Toyota will cooperate with its group as it watches the moves from Trump’s administration. Tetsuya Otake, a Toyota managing officer
six per cent against the US dollar after Trump swept to victory in the US presidential elections and traded at 112.71 yen against the dollar as of 4.38pm in Tokyo. Toyota has based its full-year earnings forecast on 107 yen per dollar and 118 yen per euro. In November it had based the fullyear earnings forecasts on 103 yen per dollar.
Toyota will invest US$ 10 billion in the US over the next five years, maintaining its pace of spending during the last half decade, joining other manufacturers in highlighting projects in response to pressure from Trump to create jobs in America. The spending includes a US$ 600 million investment to expand its Indiana plant, adding 400 jobs, the car maker said last month.
Toyota last year lost its global No.1 sales title to Volkswagen AG due mainly to its performance in the US and China. Toyota sold 2.4 million vehicles in the US last year, down two per cent from 2015.
While sales of SUVs surged on lower gas prices, demand for the Prius hybrid car fell 26 per cent. Demand for the current Camry sedan has also fallen ahead of the introduction of a redesigned model later this year.
Sales in China expanded at a slower pace than the overall market and fell behind Honda for the first time. — WP-Bloomberg