Sales of the recently redesigned Camry helped Toyota boost sales in North America.
Toyota Motor Co. reported net profits of 646.3 billion yen, or $5.2 billion, for the April-June quarter, a 10% increase, and the maker’s third consecutive record for the quarter. But the numbers barely concealed some fundamental problems facing the Japanese giant.
Worldwide sales were down by almost 6% for the first quarter of the Japanese fiscal year, to 2.1 million, with the maker facing a number of problems across Asia. As a result, Toyota lost its global sales crown for the first half of 2015 to Germany’s Volkswagen AG.
The sales decline was “a result of weaker sales in Japan,” and emerging markets like China and India, “despite stronger sales in North America,” said Tetsuya Otake, managing officer of Toyota, during a telephone news briefing.
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Overcoming the sales slide were favorable currency shifts and cost-cutting efforts that Otake described as “main positive factors.” Exchange rates alone contributed 34 billion to the bottom line as the yen fell from around 102 to the dollar to 120 year-over-year.
Toyota's CEO Akio Toyoda has been pressing the maker to cut costs and add more passionate products
On an operating basis, Toyota’s profit rose 9.1%, to 756 billion yen, or $6 billion, during the three months ending on June 30th. That was slightly short of the consensus forecast of industry analysts. But Toyota outperformed expectations on a net basis, the analysts polled by Thomson Reuters expecting the bottom line to come in at 607.5 billion yen.
Toyota officials have been signaling the likelihood of weak sales in recent months. The home Japanese market, noted Otake, was hard hit by an increase in taxes.
Sales in China, meanwhile, slipped each month during the most recent quarter. The Chinese market, on the whole, has slumped into single-digit growth after two decades of growing at a solid, double-digit pace. Toyota itself has struggled to keep up with market leaders like Volkswagen AG and General Motors, forcing it to increase incentives there. That led Toyota today to warn it “can’t be optimistic” about remaining profitable in China in the near-term.
Sales slipped in other parts of Asia, as well as in Africa and South America.
The bright spot for Toyota was in North America where it has scored well with new and updated models such as the redesigned 2015 Camry sedan. Even then, sales gains barely kept up with the overall resurgence of the U.S. market.
“While Toyota appears to be keeping pace with the U.S. market so far this year, it is clear that its position is not as dominant as it has been in the past,” said Eric Ibara, an analyst with Kelley Blue Book. “Consumer preferences have shifted away from cars and toward trucks and utility vehicles, helping domestic manufacturers that have a heavier truck lineup.”
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Looking forward, Toyota left unchanged its net profit forecast for the fiscal year ending next March 31 at 2.25 trillion yen. It increased its revenue forecast, however, to reflect favorable exchange rates.
But it slightly reduced its sales target by the full fiscal year to 8.9 million, down from an earlier forecast of 8.95 million.
That could very well allow Volkswagen to maintain its lead for the full calendar year. VW had earlier set a target of becoming the world’s best-selling automaker by 2018.
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