Toyota Motor Corp. recently ceded its title as the worldâ€™s best-selling automaker to arch-rival Volkswagen AG. Yet the Japanese companyâ€™s biggest adversary this year may be US President Donald Trump.
Japanâ€™s largest automaker expects profit to fall to 1.7 trillion yen ($15.1 billion) for the fiscal year ending next month, about a quarter less than the previous annual period. The forecast given Monday â€” still less than analystsâ€™ consensus â€” reflects challenges including a stronger yen and flagging US demand for passenger cars like the Camry sedan.
Trumpâ€™s opposition to imported vehicles risks making company President Akio Toyodaâ€™s job even more difficult. Toyota has invested about $22 billion in the US and would likely need more than $1 billion and several years to add to the six plants itâ€™s already built in politically conservative US states. The company still imports a significant proportion of high-value components like engines and transmissions, said Takaki Nakanishi, the top-ranked auto analyst for six consecutive years through 2009 in rankings by Nikkei Veritas. â€œJapanâ€™s auto industry has not sufficiently localized operations in the US, its largest sales destination market,â€ Nakanishi, a Tokyo-based analyst for Jefferies Group LLC, wrote in a Jan. 30 report.
Just before taking office, Trump called out Toyota in a tweet for plans to build a factory in Mexico to produce a next-generation Corolla, Toyotaâ€™s flagship compact, and threatened it with a â€œbig border tax.â€ Toyota shows no sign of backing down from its investment plans in Mexico. The stakes for Toyota are significant, as North America accounts for about 38 percent of its revenue. Both the company and Japan have taken some political heat from the new Trump administration, which has a lot riding on plans to revive US manufacturing.
Toyoda, who dined with Prime Minister Shinzo Abe ahead of the Japanese leaderâ€™s visit to the US this week, has said Toyota will invest $10 billion in the US over the next five years. About 75 percent of the parts used to build the best-selling Camry sold in the US are made locally, Abe told Trump during a recent call.
On Monday, Toyota missed estimates with a 39 percent decline in operating profit for the quarter ended Dec. 31. The company raised its profit forecast for this fiscal year from 1.55 trillion yen previously. Analysts project the automaker will earn about 1.74 trillion yen.
Toyota expects US sales to remain difficult for passenger cars as buyer preference shifts to trucks and SUVs, and competition has intensified with automakers stepping up incentives, Managing Officer Tetsuya Otake said on Monday. The automakerâ€™s shares fell 2.4 percent to 6,340 yen as of 9:30 a.m. in Tokyo. The benchmark Topix index slid 0.6 percent.
Toyota makes about 49 percent of the vehicles it sells in the US from plants within the country, according to the company. The company exports more vehicles to the nation than either Nissan Motor Co. or Honda Motor Co., as it manufactures most Lexus luxury cars in Japan and ships RAV4 sport utility vehicles from Canada and Tacoma pickups from Mexico.