Automotive Expotrs January 2023

Toyota cuts
output target
amid chip
crunch as profit
tumbles 25%
Toyota Motor Corp. posted a worse-thanexpected
25% drop in quarterly profit
and cut its annual output target, as the
Japanese firm battles surging material costs
and a persistent semiconductor shortage.
The world’s biggest automaker by sales
also warned that it remained difficult to
predict the future after posting its fourth
consecutive quarterly profit decline,
underlining the strength of business
headwinds it faces.
During the coronavirus pandemic, Toyota
fared better than most carmakers in
managing supply chains, but it fell victim
to the prolonged chip shortage this
year, cutting monthly production targets
repeatedly.
“We’re out of the worst phase, but... it’s
not necessarily a situation where we’re
fully supplied,” said Kazunari Kumakura,
Toyota’s purchasing group chief. “I don’t
know when the chip shortage will be
resolved.”
Operating profit for the three months
ended September fell to 562.7 billion yen
($3.79 billion), well short of an average
estimate of 772.2 billion yen in a poll of 12
analysts by Refinitiv. Toyota sales reported
a 749.9 billion yen profit a year earlier,
and 578.6 billion yen in profit in the first
quarter. Kumakura said the global auto chip
shortage continues, as chipmakers have
prioritized supplies for electronics goods
such as smartphones and computers, while
natural disasters, COVID-19 lockdowns and
factory disruption have slowed a recovery
in auto chip supplies.
He also said the supply of older-type
semiconductors, which attract little capital
investment currently, would remain tight.
Amid the gloom, shares in Toyota closed
down 1.9%, versus a 0.3% rise in the Nikkei
average.
‘Very unimpressive’
Some analysts were underwhelmed by the
performance, saying other positive factors
beyond the chip shortage should have
provided a boost.
“The yen is weaker in the second quarter,
the volume in the second quarter is much
higher than in the first quarter, and the
(COVID-19) lockdown in China does not
affect (the volume in the second quarter),”
said Koji Endo, an analyst at SBI Securities.
“Considering these points... the absolute
amount of profit in the second quarter
has got to be higher than that of the first
quarter. It is very unimpressive.”
Production rebounded by 30% in the
quarter, but the company warned that
shortages of semiconductors and other
components would continue to constrain
output in coming months.
Toyota said it now expects
to produce 9.2 million
vehicles this fiscal year,
down from the previously
forecast 9.7 million but still
ahead of last financial year’s
production of about 8.6
million units.
Toyota had told several
suppliers it was setting a
global target for the current
business year to 9.5 million vehicles
and signaled that the forecast could be
lowered, depending on the supply of
electromagnetic steel sheets.
Muted yen impact
The yen has plunged around 30% this
year against the U.S. dollar, but the
benefit of the cheap yen - making sales
overseas worth more - has been offset by
soaring input costs.The weak yen boosted
profit by 565 billion yen in the first half
of this financial year, but the gain was
more than wiped out by 765 billion yen
increase in material costs, with the cheap
local currency further inflating import
costs, Toyota said. Toyota retained its
conservative profit outlook, sticking to its
full-year operating forecast of 2.4 trillion
yen for the fiscal year through March 31
– well below analysts’ average forecast
of 3.0 trillion yen. By comparison, South
Korea’s Hyundai Motor raised its revenue
and profit margin guidance to reflect a
foreign exchange lift. Toyota, once a darling
of environmentalists for its hybrid gasolineelectric
models, is also under scrutiny from
green investors and activists over its slow
push into fully electric vehicles (EV).
Just a year into its $38 billion EV plan,
Toyota is already considering rebooting
it to better compete in a market growing
beyond its projections.
In a reputational hit, Toyota had to recall
earlier this year its first mass-produced
all-electric vehicle after just two months
on the market due to safety concerns, and
suspend production. It restarted taking
leasing orders for domestic market.
Toyota reiterated that battery-powered
EVs are a powerful weapon for
decarbonization, but that there are various
other options to achieve the goal.
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