Toyota posts record profit but warns on outlook

Japan: Japanese car giant Toyota reported a record full-year net profit Wednesday thanks to a weaker yen and US tax cuts, but warned about the outlook for the next 12 months.

Company president Akio Toyoda said the industry was facing “profound change” and pledged to transform the auto giant into “a mobility company”.

Japan’s leading carmaker said net profit jumped 36.2 percent to 2.49 trillion yen ($23 billion) in April-March, but for the current year it expects that to fall 15 percent to 2.12 trillion yen.

The boost was driven by a weaker yen and cost-cutting measures, but also US tax cuts, which have pushed up profits for other automakers in recent months.

“Toyota quickly recovered thanks to the US tax cuts and a weak yen for the last fiscal year,” Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm, told AFP ahead of the Wednesday earnings report.

Toyota said sales rose 6.5 percent to a record 29.3 trillion yen despite a 0.1 percent decline in vehicle sales by unit, and operating profit was up 20.3 percent.

It said it expected the market in developing countries to stay steady, with the market in emerging economies expanding gradually.

But it also warned of “profound transformation” in the industry as a whole because of “increasing, serious environmental issues and other social challenges, (and) technological innovation such as automated driving”.

Toyoda said the company was facing a “once-in-a-century” challenge, “as our rivals change, as well as the rules of the competition”.

He said the company now faced rivals that include IT companies with massive capital and the ability to adapt swiftly and that Toyota would invest in new technology and look for alliances to create novel products and services. He gave no further specifics.

– Cars ‘closer to human beings’ –
“I have decided to transform Toyota from a car manufacturer to a mobility company,” he said, without offering much detail on what that would entail beyond providing “various services involving movement of people around the world”.

Vice president Koji Kobayashi described only in broad terms the possible scope of the innovations ahead, saying “cars will change from the conventional concept of vehicles we have right now.”

“We think cars will become closer to human beings, that is, for example, cars that can collect information from (parts of) itself and by connecting to other cars,” he added.

Katsuyuki Nakai, chief analyst at rating firm Standard and Poor’s said the innovations being proposed by Toyota’s leadership were longer-term projects.

“The changes in the industry towards mobility would probably make a great impact in the longer-term, for example with the emergence of self-driving taxi services and changes in the way cars are owned,” he told AFP.

Analysts expect individual car ownership to fall as customers opt for “pool ownership” and sharing cars over having their own, and most auto companies are already testing self-driving vehicles as they look for new ways to appeal to consumers.

Toyota said it expects a strong yen for the current fiscal year, with sales forecast to slip 1.3 percent to 29 trillion yen.

A higher yen makes Japanese carmakers less competitive in foreign markets and deflates profits when repatriated.

“It is hard for the company to draw up a positive scenario for the current fiscal year as positive factors can’t be seen,” said analyst Takada.

Shares in Toyota surged 3.75 percent to close at 7,424 yen after its earnings announcement.