Toyota’s Yen-Inspired Momentum May Hit Headwinds Next Year

Source: Toyota

On a positive note, Toyota was able to surpass its 10 million vehicle goal for the first time in history while full-year profit rose almost 90 percent, the company reported on Thursday. However, shares are being weighed down by conservative guidance for the year ahead, as momentum from the weakened state of the yen is set to wear off.

The January-to-March quarter was marred by the $1.2 billion settlement paid to the Department of Justice, and as a result, fourth-quarter profits dropped to 297 billion yen ($2.9 billion) from 314 billion a year earlier. Cost-reduction efforts managed to save 290 billion yen, and Toyota spent about 180 billion yen on marketing efforts during the year.

“The tailwind is over,” Tatsuo Yoshida, an automotive analyst at Barclays, told Bloomberg by phone prior to Toyota’s release of its results. “Unlike in a usual year, we cannot assume flat sales or even growth in Japan because of the hangover from last fiscal year.”

The company is projecting that it will “only” sell 9.1 million consolidated units for the next fiscal year and predicts consolidated net revenue of 25.7 trillion yen, with operating income of 2.3 trillion yen and net income of 1.78 trillion yen for the fiscal year that ends March 31, 2015. Toyota is assuming an exchange rate of 100 yen to the dollar.

Source: Toyota

The soft guidance comes at a particularly bad time, as the industry juggernauts — notably, General Motors and Volksagen AG — have both committed to becoming the number one automaker in the next few years, and all are pushing to break the 10 million vehicle threshold. It also comes as Toyota prepares for the release of its redesigned Camry sedan and a renewed Prius hybrid, the best selling of its class in the world. On paper, Toyota should be having an off year, especially now that the unintended acceleration settlement has been paid off.

CEO “Akio [Toyoda] has changed the company in a better way to be more focused on the product attractiveness and styling, not just the engineering and hard numbers,” Yoshida said to Bloomberg. “He’s emphasized the emotional appeal of the products, which typically were lacking for Toyota in the past.”

Since that recall incident, Toyota has been putting a lot of energy into restructuring its operations and initiating safeguards to prevent a situation like that from happening again. Meanwhile, other automakers have been letting the steam on full in efforts to boost volume and sales. But for Toyota, getting it right has become a larger priority, and perhaps for the better. Lexus, its luxury brand, has seen its growth slowed intentionally as a three-year freeze is now imposed on new car plants to tilt priorities to quality and efficiency, Bloomberg reports.

Additionally, the softened guidance comes after one of the strongest sales years on record since the financial crisis, as pent-up demand, resurgence in industry, and stabilizing unemployment sent people back to the showrooms. How long that momentum will carry on for is anyone’s guess, but it’s possible that all automakers may feel the pangs of slowing growth as the sales fires begin to smolder.

One factor that the entire industry will have to contend with is the ambitious five-year plan recently laid out by Fiat Chrysler Automobiles (FIATY.PK). We covered that story recently, detailing what the changes would mean for each brand — a few of which compete directly with Toyota (the new Camry will be facing off with the new Chrysler 200). Here’s an example of what will be happening inside Fiat Chrysler:

Source: Chrysler


“The Chrysler brand is not luxury — it’s not premium. Chrysler is mainstream American brand,” brand CEO Al Gardner said during Tuesday’s presentation. And to help it become the mainstream brand the company wants it to be, there are some big changes on the horizon. There’s going to be a new Town & Country minivan, but get this: it’s going to be a plug-in hybrid. That means that for suburban families that don’t travel more than 20-30 miles per day, there’s a good chance the car’s electric range will cover that before using gas. Combined, Chrysler is aiming for 75 miles per gallon. Odyssey, this is your heads-up.

Gardner is aiming for 800,000 unit sales by 2018, which marks an increase of 350,000 units compared to its 2013 sales results, Autoblog reports. To help define its image later on, a new 100 compact sedan will be introduced in 2016. That’ll go up against the Focus, Corolla, and Civic.

Additionally, the brand is planning a small crossover (that also gets a PHEV option, Jalopnik points out) that will arrive in 2017, and the 300 sedan will get a full makeover that will be introduced at this year’s Los Angeles Auto Show. The crossover will be a crucial vehicle for the brand, as the growth of the segment has been shouldering a lot of the growth of the industry overall.

Source: Dodge


Perhaps the most dramatic changes at Fiat Chrysler are occurring here. SRT, currently the performance brand that was spun off from a performance sub-brand, will be folded entirely. This means that the SRT Viper is, once again, the Dodge Viper. The Avenger, which hasn’t exactly enjoyed great popularity, is dead. The Grand Caravan is dead, in order to minimize inter-brand competition with the Chrysler Town & Country, but that will help Dodge become the performance line of the group, having absorbed SRT.

The Challenger and Charger will continue as is until 2018, when each receives a full redesign. A new B-segment vehicle will join the range the same year; the Journey, a bit of a laggard in its class at the moment, will be getting the SRT treatment, as well as a full makeover in 2017. A Dart SRT, with all-wheel drive and a turbocharged engine, will be arriving in 2016 to pursue the WRX- and GTI-loving hot compact enthusiasts.

You can read the full report on Chrysler’s big shakeup here.