Toyota nearly doubled its net profit in the quarter to June despite a slight drop in the number of cars it sold, as a weaker Japanese currency helped the increase the yen value of its foreign earnings.
The world’s biggest car-maker said on Friday that profit in the first quarter of its accounting year jumped 94% compared with the same period last year, to Y562bn ($5.6bn). The gains came even as unit sales retreated 1.6%, mainly because of the end of a “green car” subsidy program in Japan that sapped demand in its home country.
Karl Brauer, senior analyst at Kelley Blue Book, the car information service, said to Financial Times that Toyota could struggle to protect its share of the market as Americans underline their preference for larger vehicles.
“It’s confirmation Toyota has revitalized its production efficiency. That’s impressive, but it can’t stop a US market shift toward large trucks and SUVs,” he said.
The fall in the yen, aimed at ending prolonged consumer-price deflation, has allowed car manufacturers to gain more profit while, in some cases at least, reaching for greater market share by cutting the prices they charge foreign customers.
Like other Japanese car-makers, Toyota benefited from a decline of the yen that cut one-quarter of its trading value against the US dollar and the euro compared with a year ago. Earnings at Nissan, Mazda, Suzuki and Fuji Heavy Industries, the producer of Subaru vehicles, also improved in the quarter.
Mazda, while being a smaller producer that makes most of its vehicles in Japan, took a net profit of Y5.5bn from a loss of Y6.5bn in previous year. Nissan, Japan’s second-largest car-maker, which has been aggressive in shifting manufacturing to other countries, experienced a relatively modest 14% profit rise.
Nissan’s US sales expanded 20% last quarter after it cut prices on seven models including its top-selling Altima version. The beneficial effects of the yen have been magnified by cost cuts implemented by Japanese car-makers during the currency’s relentless climb between 2007 and last year. Also the growing demand and recovery in US market triggered some gains. The signals of US demand after its drop during the global financial crisis has been welcomed by Japanese producers, but competition from recovered Detroit car-makers has posed a new serious competition.
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