Toyota not optimistic about China

TOYOTA says it “can’t be optimistic” about profitability in China, the world’s biggest vehicle market, where slowing growth is forcing the Japanese manufacturer to cut prices and offer buying incentives to keep up with rivals.

Toyota, which yesterday reported record first-quarter net profit for the third consecutive year, had enjoyed rising sales in China but price wars had been sapping profit, company officials said. China vehicle sales fell each month in the quarter, as economic growth crawls at its slowest pace in 25 years.

Analysts expect a stock market crash from mid-June to have a knock-on effect and further drag on vehicle sales.

Japanese motor vehicle makers are expected to fare better than rivals due in part to sales of new sports utility vehicles (SUVs). But at Toyota, price competition has hit its RAV4, as car makers seek to capitalise on a vogue for SUVs.

“In April to June, vehicle sales have progressed firmly, but as for profitability we can’t be optimistic,” managing officer Tetsuya Otake said.

Spokesman Hiroshi Hashimoto called the market “extremely hard” and said, “There isn’t much profitability in China.”

For April to June, Toyota said net profit had risen 10% to ¥646.4bn ($5.2bn), beating the ¥607.5bn average estimate of 11 analysts polled by Thomson Reuters.

Operating profit rose 9.1% to ¥756bn on revenue that grew 9.3% to ¥6.99-trillion.

The car maker attributed the earnings rise to cost-cutting and currency gains from a strong US dollar, which had increased the value of income when converted into yen. Those factors compensated for a 0.4% decline in global retail sales at 2.5-million vehicles.

Toyota said the fall had been due to economic slowdown in Southeast Asia and lower sales of minicars in Japan, which were recently subject to a tax hike.