Toyota has been focusing on squeezing out productivity gains and better using existing plants – it put on hold building new factories for several years. Toyota said slowing growth in China’s auto market is forcing it to cut prices and offer buying incentives to keep up with rivals. Among the factors that contributed to Toyota’s profit for April-June include cheap yen and cost reduction efforts. Both are record figures for the April-June quarter. Toyota’s sales with its Chinese joint ventures declined 0.1 percent in January-March.
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While Toyota was surpassed by Volkswagen AG for the top spot in world-wide vehicle sales in the first half of the year, the size of its profits continues to overwhelm its biggest rivals. Analysts project it may earn about $26 billion in operating profit this year, nearly double the $14.8 billion estimated for Volkswagen.
“It is a decent result”, Kentaro Hayashi, an analyst at Tachibana Securities Co., said by phone.
Toyota’s fiscal 2016 forecast calls for the company to sell 10.15 million vehicles, down slightly from the 10.168 million the company sold in fiscal 2015. The stock declined 1% to close at 8,121 yen in Tokyo before earnings were announced. In a union newsletter, Managing Officer Yoichi Miyazaki said the company must make up for the shortfall by boosting sales in developed markets and asked for the cooperation of Japanese workers in handling the increased workload.
Toyota told workers in Japan in June that it would be “very difficult” to meet its annual sales target due to weak demand in emerging markets. Toyota’s global retail sales slipped 0.4 percent to 2.502 million vehicles during the quarter.
That could mean still stronger profits for Toyota later in the year, as well as vindicating Toyota president Akio Toyoda’s decision to keep a share of production in Japan.
Spokesman Hiroshi Hashimoto called the market “extremely hard” and added “there isn’t much profitability in China”.
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In a separate statement on Tuesday, the Japanese automaker confirmed it would invest 59bn yen to build a new line at its Tianjin plant in China, which is expected to become operational by mid-2018.
