Toyota share price down, to launch new production platforms

Toyota Motor Corp unveiled on Thursday details around its new manufacturing process which is based on sharing car components in order to reduce overall expenses.

The Japanese automaker said that its new system, dubbed Toyota New Global Architecture, is aimed at manufacturing at least half of the companys production by 2020.

Toyota also said that the new “simple and slim” product lines featuring in the manufacturing program would allow the company reduce it investment for new factories by 40% compared to 2008 level. However, it said that “retooling” its current production facilities to support the new platforms would increase expenses for some time, but restated the future levels of factory spending would be significantly lower.

The company expects to roll out its first platform this year, which will be for medium-sized front-wheel-drive vehicles, like the Toyota Prius. Then the company said it would introduce platforms aimed at compact and large cars, both front- and rear-wheel drive.

Toyota plans to utilize standardized parts, powertrain and engineering components for around half of its vehicles sold worldwide, which would allow the company to slash a fifth of its development costs.

The move to use the same or similar parts for its vehicles will allow the company to reduce the number of suppliers, while also improving quality. At the same time, however, the strategy puts the company at a greater risk. A single faulty part may force Toyota to initiate recalls of a wide range of models, rather than just one or few.

The company said vehicles made under the new platform would be more fuel efficient due to changes to engines and the adoption of lightweight frames. Additionally, they will have lower center of gravity which will improve handling.

“I want 2015 to be a year in which we take steady and bold steps toward sustainable growth. We can do this by launching new models that incorporate TNGA, and making good use of this intentional pause to strengthen our competitiveness,” said President Akio Toyoda.

Toyota lost 1.44% on Friday and closed at JPY 8 481 in Tokyo, marking a one-year increase of 47.98%. The company is valued at JPY 29.72 trilion.

According to the Financial Times, the 26 analysts offering 12-month price targets for Toyota have a median target of JPY 8 900, with a high estimate of JPY 10 500 and a low estimate of JPY 7 800. The median estimate represents a 3.43% increase from the last closing price.