TOKYO — Toyota Motor is facing an 80% drop in operating income this year, the Japanese car giant admitted on Tuesday as disruption caused by the coronavirus pandemic rips through demand and production in the global automotive sector.
But Toyota said it expected sales to recover to pre-coronavirus levels by 2021, defying some analysts’ expectations of a more prolonged industry slowdown.
Rival Honda Motor meanwhile scrapped its earnings guidance for this year in a sign of the uncertainty created in the auto industry by the coronavirus crisis. Both companies on Tuesday reported declines in annual earnings.
Akio Toyoda, president of Toyota, said the shock from the coronavirus pandemic was far greater than had been faced after the global financial crisis that hit in 2008. But he said the world’s second largest car producer could be “the leader of the economic rebound” once the pandemic subsides.
An expected operating profit of 500 billion yen ($4.6 billion) for this fiscal year, which ends in March 2021, would be “the outcome of Toyota strengthening the corporate structure,” Toyoda said.
“The earnings this time is a starting point for the company to become a new Toyota,” Toyoda said, adding that the company faced an operating loss of 461 billion yen for the fiscal year ended in March 2009, after the financial crisis.
Sales revenue for the current year is expected to fall 20% to 24 trillion yen, while overall sales volumes are expected to fall 22% to some 7 million vehicles.
Toyota announced a net profit of 2.076 trillion yen for the 12 months to the end of March, down 10.3% from the previous year, while revenue fell 1% to 29.9 trillion yen.
Japan’s largest carmaker by production had halted 27 plants in 20 countries by mid-April as the coronavirus pandemic spread around the globe.
But Toyota said it was seeing a recovery in the Chinese car market, the world’s biggest, where its sales rose 0.2% in April after the company restarted full production there at the end of March.
While weak demand and problems with global procurement are expected to hit output, Toyota also restarted its production in the U.S. and Canada on Monday, though on a limited basis.
Kenta Kon, Toyota’s CFO, said global unit sales are running at 60% of the previous year level for the current period from April to June. “We believe they will recover [to] an 80% level for the period July to September, and 90% for the period October to December … They will bounce back to the previous year level by the year-end and the beginning of 2021,” he said.
Some analysts said they thought Toyota remained overly optimistic in its view of how the year would pan out. Nobuhito Massimiliano Abe, at A.T. Kearney, a management consultancy, said he believes global car sales in 2020 would be at 20% to 40% of last year’s levels.
“China and emerging markets were seeing growth during the 2008 financial crisis,” he said, suggesting a greater magnitude of damage to the industry this time. “The automobile market was already slowing down even before the coronavirus,” notably in China, Abe added.
Meanwhile, Honda posted a net profit of 455.7 billion yen for the 12 months to the end of March, down 25.3% from the previous year. Its revenue fell 6% to 14.9 trillion yen.
The Japanese carmaker’s unit sales for four-wheeled vehicles for the year ended in March fell 10% to 4.79 million, hit by a plunge in markets such as China, the U.S. and India.
“It is unclear how many vehicles will be sold, and how customers are returning to our dealers,” said Kohei Takeuchi, senior managing director of Honda. The company has resumed production at only 70% of its plants for four-wheeled vehicles, and at half of its plants for motorcycles.
Both carmakers were bullish on their investment in next-generation technologies. Referring to Toyota’s investment, including a plan to build a city powered by hydrogen fuel cells as a laboratory for autonomous cars, Toyoda said he would “keep stepping on the accelerator.”
Koji Kobayashi, Toyota’s chief risk officer, said the company’s break-even point had significantly improved over the past 11 years. “We should keep investing for the development for the future, and have enough capital to enable this,” he said.
Honda President Takahiro Hachigo also said the carmaker would invest in research and development. “We would like to invest for our survival in the future even at tough times,” he said.