Toyota ‘can’t be optimistic’ about profitability in biggest car market
Print Edition
JAPAN’S Toyota Motor Corp said it “can’t be optimistic” about its profitability in China, the world’s biggest car market, where slowing growth is forcing it to reduce prices and offer incentives to compete with rivals.
Toyota, which yesterday reported record first-quarter net profits for the third consecutive fiscal year, enjoyed rising China sales, but price wars sapped profit, company officials said at an earnings briefing.
Car sales in China fell each month in the quarter as economic growth crawled at its slowest pace in 25 years, draining consumer sentiment.
Analysts expect a stock market crash from mid-June to have a knock-on effect and further weigh on vehicle sales.
Japanese carmakers are widely expected to fare better than rivals due in part to sales of new sport-utility vehicles. However, at Toyota, price competition has particularly hit its RAV4 as carmakers seek to capitalize on a vogue for SUVs.
“In April-June, vehicle sales progressed firmly but as for profitability, we can’t be optimistic,” said Managing Officer Tetsuya Otake.
Spokesman Hiroshi Hashimoto called the market “extremely hard,” adding “there isn’t much profitability in China.”
Toyota said its net profit in the April-June quarter rose 10 percent to 646.4 billion yen (US$5.2 billion), beating the 607.5 billion yen mean estimate of 11 analysts polled by Thomson Reuters.
Operating profit rose 9.1 percent to 756 billion yen on revenue that grew 9.3 percent to 6.99 trillion yen.
The carmaker attributed the earnings rise to general cost-cutting and currency gains from a strong US dollar, which increased the value of income when converted into yen.
Those factors made up for a 0.4 percent decline in global retail sales at 2.5 million vehicles. Toyota said the fall was due to economic slowdown in Southeast Asia and lower sales of mini-cars in Japan.
Toyota left its net profit forecast for the year through March at 2.25 trillion yen, and raised its revenue estimate by 1 percent to reflect increased currency gains. It raised its global sales view by 0.6 percent to 8.95 million vehicles.
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