Toyota joins Nissan declaring U.S. auto market at peak
Japan’s two largest carmakers have arrived at the same conclusion: the U.S. auto market that’s functioned as a growth engine has run out of gas.
Toyota Motor Corp. cut its forecast for North American sales this fiscal year by 60,000 vehicles and for the first time said it’s expecting a decline for the year, as American consumers shift away from fuel sippers like the Prius hybrid and toward trucks and sport utility vehicles. Nissan Motor Co., which posted a drop in profit as it gave heftier incentives that buoyed deliveries, said it’s not seeing room for further expansion.
“The market turned out to be somewhat weaker,” Takahiko Ijichi, a Toyota executive vice president, told reporters Tuesday after the carmaker reported a 43 percent plunge in quarterly operating profit. The North American market “really requires very careful managing going forward,” he said.
The more dour outlook is significant not only for Toyota and Nissan but for Japan’s economy. For the nation’s automakers, North America remains the biggest export destination, with more than 1.3 million passenger cars shipped during the first nine months of the year. That was double the number of vehicles exported to Europe and four times the number sent to the rest of Asia, including China, which has seen a tax cut-induced buying spurt.
The peak also has arrived at an inopportune time because the stronger yen continues to drag on earnings. While Toyota City, Japan-based Toyota raised its profit forecast for the fiscal year after the yen rallied less than expected, it’s still projecting operating profit to slump by 40 percent to 1.7 trillion yen ($16.3 billion) for the year ending in March.
Nissan, meanwhile, said operating profit fell 19 percent last quarter, driven primarily by the impact of a stronger yen. For the year ending in March, operating income probably will drop by 10 percent to 710 billion yen, according to the Yokohama, Japan-based company.
“It’s a peak and we don’t see a potential for further growth” in the U.S. industry, Hiroto Saikawa, co-chief executive officer, said at a press conference Monday. “Incentives are rapidly growing in the industry, and we are paying close attention to it.”
Automakers spent an average of $3,262 per vehicle on marketing promotions this year through October, up 13 percent from a year earlier, according to Autodata Corp. Both Toyota and Nissan are increasing incentives at a slower pace than the industry average, with the researcher estimates Nissan’s spending at $3,607 per vehicle and Toyota’s at $2,270 per vehicle.
Toyota has been using “appropriate levels” of incentives to buoy sales of its mainstay passenger models, the Camry sedan and Corolla compact, Ijichi said Tuesday. Nissan said incentive spending reduced operating profit in the U.S. by 40.5 billion yen, raising concerns for Takaki Nakanishi, an analyst with Jefferies Group LLC.
“We cannot underestimate risk in this market,” Nakanishi, who has a hold rating on Nissan shares, wrote in a report Monday. The drag on operating profit from incentives, after a 36.9 billion yen reduction in the first quarter, “reconfirmed that Nissan has reached a peak in U.S. profitability,” he said.
Toyota and Nissan are more upbeat about the prospects for markets in Asia outside Japan.
For Toyota, it’s now forecasting 1.56 million vehicle sales for the region this fiscal year, 90,000 more than projected just three months ago. Nissan boosted China sales by 8.2 percent this year through September and is targeting deliveries of 1.3 million vehicles to the market this year.
Industrywide passenger-vehicle deliveries surged 20 percent in October to 2.22 million, the China Passenger Car Association said Tuesday. Consumers are rushing to buy models with smaller engines ahead of a tax cut due to expire at the end of this year, even as the government said it’s looking at extending the rebate.
“Regardless, it may impact buying behavior in the fourth quarter this year,” David Schoch, president of Ford Motor Co.’s Asia-Pacific unit, said on Tuesday in Chennai, where the automaker will spend $195 million to open a technology and business center by early 2019. “There is still a lot of growth left in China, particularly in lower-tier cities. They still have millions and millions of people.”
Strong yen sends Toyota’s quarterly profit sinking 36%
Toyota Motor Corp. reported Tuesday that its July-September profit sank 36 percent as a stronger yen eroded its overseas earnings.
Lagging sales also pinched the Japanese automaker’s fiscal second quarter profit, which fell to 393.7 billion yen ($3.8 billion) from 611.7 billion yen in the same period the previous year. Quarterly sales slipped nearly 9 percent to 6.48 trillion yen ($62.3 billion).
The manufacturer of the Prius hybrid, Camry sedan and Lexus luxury models expects to sell 10.1 million vehicles worldwide through March 2017, including sales by affiliates Hino Motors and Daihatsu Motor Co. Toyota has led world vehicle sales in recent years.
Toyota raised its annual profit forecast to 1.5 trillion yen ($14.4 billion) from an earlier 1.45 trillion yen ($13.9 billion). But that’s still below the 2.3 trillion yen it earned last year.