Here’s Why Toyota Is Boosting Its 2016 Profit Forecast – Fortune

Posted: Wednesday, November 09, 2016

Toyota Motor on Tuesday raised its full-year forecast for operating profit by 6% as it expected efforts to scrimp and save would go further to curb the negative impact of a strong yen than previously anticipated.

The automaker, which has invested heavily in hydrogen fuel-cell vehicles as the most promising “green” alternative to conventional cars, also suggested that it was warming to the idea of producing more electric vehicles.

Behind its forecast lift were cost cuts, including moves to source more vehicle parts locally, and initiatives like marketing locally produced cars more aggressively to mitigate the impact of a strong yen, Executive Vice President Takahiko Ijichi told reporters at a briefing.

“The reason behind the rise in our operating profit forecast is the emergency measures we implemented immediately after the Brexit vote to improve profitability. These efforts have been going well,” he said.



, one of the world’s biggest automakers, now expects operating profit to come in at 1.7 trillion yen ($16.28 billion), up from a previous forecast of 1.6 trillion yen.

The updated forecast was based on the assumption that the yen will average around 103 yen to the U.S. dollar, and 114 yen to the euro in the year through March, weaker than previous forecasts for 102 yen and 113 yen.

Despite the rosier outlook, operating profit would still be its lowest since 2013, and 40% lower than an all-time high of 2.85 trillion yen last year.


North American Tastes

Toyota expects that ongoing cost-cutting will bolster operating profit even as the automaker expects global retail vehicle sales to decrease to 10.1 million units in the year to March from a previous forecast of 10.15 million.

In North America, its largest market, the automaker expects to sell 2.82 million vehicles, down from a previous forecast of 2.88 million.

Like rivals Nissan Motor


and Honda Motor


, Toyota is struggling to keep up with the North American market’s current preference for larger models including sport utility vehicles and trucks over sedans, a trend resulting from historically low gasoline prices.

For the July-September period, operating profit fell 43% to 474.6 billion yen compared with a year earlier as Toyota smarted from a strong yen that has made its Japan-built cars less competitive and crimped the value of overseas earnings.

‘EV Option’

Responding to a Nikkei newspaper report that Toyota is looking at mass-producing long-range electric vehicles (EVs) around 2020, Ijichi said the automaker planned to develop and produce a variety of lower- and zero emission vehicles as an alternative to vehicles powered by conventional gasoline engines.

“We still believe that fuel cell vehicles are the best option for ‘eco cars’, and our product strategy will continue to reflect this direction,” Ijichi said.

“But we would like to consider a range of ‘eco cars’, including hybrids, plug-in hybrids and also EVs … We would like to have the option of developing (full-sized) passenger EVs.”


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