It’s no secret that the car industry has been rocked since the coronavirus pandemic intensified. While there are some signs of recovery, we are by no means out of the woods yet. This has been made even more evident by Toyota’s recent financial forecast. The popular carmaker expects profits to drop by 80 percent due to the devastating impact of COVID-19.
The lowest profit drop in nine years
Just like other global carmakers, Toyota has seen some hard times. Among the most notable challenges was the global financial crisis that ranged from 2008 to 2012. At that time, all Toyota was focused on was “stopping the bleeding” and doing all possible to further invest in the company’s future.
Now, Toyota is facing its greatest challenge even as operations slowly start to resume. Car buyer’s confidence is down due to rising unemployment numbers. Corporate offices have been extending their work from home policies, so many people don’t even have to think about commuting at all. The lower consumer demand is expected to impact the car industry for the foreseeable future.
“The coronavirus has dealt us a bigger shock than the 2008 global financial crisis,” Toyota President Akio Toyoda said. “We anticipate a big drop in sales volumes, but despite that, we are expecting to remain in the black. We hope to become a leader of the country’s economic recovery.”
Why Toyota’s sales decline is a big deal
Toyota remains one of the most profitable car companies in the world. The carmaker’s models consistently earn high predicted reliability ratings. If they are struggling worldwide, that’s when you know things are really tough.
By the end of Toyota’s fiscal fourth-quarter this past March, the carmaker stated that profits had dropped to $3.56 billion. Net income flattened to $585.29 million during the same time; revenue fell by 8.4 percent. International retail sales fell by 11 percent.
North America was hit hardest by the decline, as sales dropped by 8 percent. To help put this in perspective, Toyota saw a sharp decrease in vehicle sales by 127,000 units. In 2019, the carmaker saw exceptional sales volumes with about 10.6 million vehicles sold worldwide.
Carmaker remains optimistic
Toyota expects that the virus will continue to decrease sales volume for the rest of the year. The carmaker hopes that normal sales volume will return in 2021. Even though these times are extremely tough, Toyota is still focusing on investing in its future. The carmaker also is still keeping its research and development investments about the same.
When everything is all said and done, Toyota is in a better position than most. The carmaker generally offers safe and reliable products at a more affordable cost. Toyota also has a large cash reserve fund that should further assist them throughout this year.
For additional assistance, the carmaker has also requested a credit line of $9 billion from Sumitomo Mitsui Banking Corp. and MUFG Bank to minimize the increasing business costs related to the coronavirus pandemic.