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Toyota unfazed by chip shortage, forecasts rebound in profit

Stock MarketsMay 12, 2021 06:00AM ET
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© Reuters. FILE PHOTO: The Toyota logo is seen at its booth during a media day for the Auto Shanghai show in Shanghai, China, April 19, 2021. REUTERS/Aly Song

By Eimi Yamamitsu

TOKYO (Reuters) -Toyota Motor Corp forecast its profit would bounce back to pre-pandemic levels this year, as the world's biggest automaker exuded confidence it can tackle a global chip shortage that has stung its rivals.

Japan's top automaker, which has been stockpiling the semiconductors that are used in everything from engine maintenance to car safety and entertainment systems, said on Wednesday it is not seeing any major short term impact from the shortage which has been baked into its forecasts.

Toyota also announced a $2.3 billion share buyback, a one-to-five stock split and set bigger targets for electric vehicles (EVs) production.

The upbeat forecast for the full fiscal year reinforces Toyota's robust growth momentum that saw its March-quarter profit almost doubling and deepens a performance divergence with its rivals, who are battling billions of dollars of lost revenue due to the chip shortage.

CFO Kenta Kon said Toyota, famous for its just-in-time inventory management, benefitted from efforts to improve its supply-chain management to mitigate the impact of natural disasters following the Fukushima earthquake in 2011.

"We are now able to make assessments of alternative products in a speedy matter. That is one of the factors of us being able to mitigate the impact of semiconductor supply shortages," he told a media briefing.

The Toyota executive warned against complacency, though, saying the shortage situation was still fluid and the impact in the second half of the fiscal year was uncertain.

Toyota surprised rivals and investors last quarter when it said its output would not be disrupted significantly by ongoing chip shortages even as Volkswagen (DE:VOWG_p), General Motors (NYSE:GM), Ford, Honda and Stellantis, among others, have been forced to slow or suspend some production.

The global auto industry has been grappling with that chip shortage since late last year, which was worsened in recent months by a fire at a chip plant in Japan and blackouts in Texas where a number of chipmakers have factories.

Toyota shares reversed course on Wednesday to rise 2.1% after the results, contrasting with a 10% tumble for smaller rival Nissan (OTC:NSANY) whose guidance disappointed investors.

Toyota, the maker of the RAV4 SUV crossover and Prius hybrid vehicles, almost doubled its fourth-quarter operating profit to 689.8 billion yen, beating an estimate of 641.5 billion yen from 10 analysts compiled by Refinitiv.

It forecast a 14% jump in profit to 2.50 trillion yen for the fiscal year that began on April 1 against an 8.4% profit decline for the year that just ended.

Toyota expects renewed demand in the United States, its biggest market, to drive that recovery and forecast overall sales to grow 6.4% to 10.55 million vehicles for the year.

Nissan, Japan's No.3 automaker, said on Tuesday it expects to break even this business year, defying expectations for a return to profitability.

Japan's second-biggest automaker Honda is due to report annual results on Friday.

Toyota also laid out on Wednesday its EV gameplan, saying 8 million of its vehicles would be electrified annually by 2030, or around 80% of its current yearly vehicle sales.

That target compared with Honda's aim to increase its ratio of EVs and fuel cell vehicles (FCVs) to 100% of all sales by 2040, and Volkswagen's 2025 deadline to overtake U.S. pioneer Tesla (NASDAQ:TSLA) and become the world's biggest seller of EVs.

Nissan has also set a goal to electrify all of its new models in key markets in the early 2030s.

Toyota executives took pains to defend the automaker's long-time strategy of selling a mix of fuel-efficient cars that suited each market - gasoline-electric hybrids and plug-in hybrids in some, and battery electric vehicles in others.

"The solution has to be sustainable and practical," Chief Communications Officer Jun Nagata said.

$1 = 108.8500 yen)


Toyota, Nissan share moves

Japan automakers' comparison (interactive graphic)


Toyota unfazed by chip shortage, forecasts rebound in profit

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