Toyota Steers For Record Profits

By on February 5, 2014

It’s full-speed ahead for the world’s biggest car maker, despite its many recalls.

Toyota, the world’s largest car maker, is going full throttle, as a weaker Japanese currency enabled it to raise its full-year net profit forecast to what would be a record 1.9tn yen (£11.5bn).

The Japanese company’s previous forecast was 1.67tn yen, and it was the third time in as many quarters it had revved up its estimates.

Operating profit for the quarter to December 31 jumped to 600.5bn yen, almost five times what it was in the same period in 2012.

Japanese Prime Minister Shinzo Abe’s ‘arrows’ are clearly hitting their target for Toyota. The ambitious economic reforms, also known as Abenomics, have weakened the yen by 25% against the dollar since the end of 2012.

That helped Toyota retain poll position in the car sales race for the second year in a row. It sold almost 10 million vehicles in 2013, around 270,000 more than US rival General Motors. Kerching…

Meanwhile, fellow Japanese car maker Honda is also cashing in on currency, reporting its net profit for the last nine months rose almost 40% to 403bn yen last week. Nissan is due to report its results next week.

Toyota has performed a nifty handbrake turn: over the last two years it has recalled over 20 million cars, and it was hit hard by the Japanese earthquake and tsunami back in March 2011.

However, there could be less fuel in Toyota’s tank in 2014 if the yen’s decline tapers off. A planned increase in Japanese sales tax in April will also probably hit the company’s domestic business.

If that wasn’t enough, weak manufacturing data from the US and China could herald slowing demand from the global economic juggernauts. The Institute for Supply Management US manufacturing index plummeted to to 51.3 in January from 56.5 in December, the lowest level since May 2013, while China’s official manufacturing data showed activity had dropped to a five month low.

Stuttering global growth, and potential turmoil from the Fed tapering bond buying, will hit car makers worldwide though, so, for now, Toyota can relish being in the driver’s seat.

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