Clear sky, cloudy horizon for automakers
Thursday, August 05, 2021 1:43 PM

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Aug. 5, 2010 (The Yomiuri Shimbun) -- With eight major automakers posting profit increases in the April-June quarter, the auto industry seems to be recovering, but uncertainty remains as the yen has risen and a subsidy program for eco-friendly cars will expire next month.

On Wednesday, Toyota Motor Corp. (NYSE:TM) announced its operating profits returned to the black after experiencing a loss a year earlier.

"We've achieved better-than-expected profits," Toyota's Senior Managing Director Takahiko Ijichi told reporters.

Toyota's operating profits for the April-June quarter accounted for more than three quarters of its projected total for fiscal 2010. With such upbeat results, the automaker raised its earnings forecast for the current year to 330 billion yen, up 50 billion yen from the previous projection.

Toyota's recovery has been on the back of brisk sales in Japan and other Asian nations. Sales in Asia rose 1.7-fold to 834.9 billion yen from a year earlier, while operating profits jumped 3.3-fold to 90.2 billion yen.

The company also saw domestic new car sales grow 22.8 percent in the quarter to 500,000 units, as sales of the Prius hybrid received a boost from government subsidies for eco-friendly cars. For the current business year, Toyota revised its domestic car sales projection upward to 1.97 million units, up 50,000 from its May forecast.

Seven other automakers have also been enjoying robust sales at home and in Asia.

Honda Motor Co., Suzuki Motor Corp. (OOTC:SZKMY) and Daihatsu Motor (OOTC:DHTMY) Co. reported increases in operating profits and posttax profits, while Fuji Heavy Industries Ltd. swung back to profitability.

Nissan Motor Co.'s sales in China soared 68.2 percent year on year thanks to brisk sales of its Tiida compact car. For the quarter, the company's operating profits rose significantly and its posttax profits returned to the black.

Meanwhile, Mazda Motor Corp. (OOTC:MZDAY) saw its operating profits turn around from a loss the previous year, but posttax profits remained in the red due to sluggish sales in Europe, home to about 15 percent of the firm's global sales. Likewise, Mitsubishi Motors Corp. (OOTC:MMTOY) only narrowed losses due to a slow recovery in sales in Russia. However, both firms are expected to be profitable for the business year. ===

Not everything rosy

Despite the recent good news, concerns remain. Nissan executive Joji Tagawa said prospects "are unclear, as we're worried about the stronger yen and price increases in raw materials."

In the April-June quarter, the rapidly rising yen reduced Toyota's operating profits by 30 billion yen, Nissan's by 15.3 billion yen and Honda's by 14.4 billion yen. Further strengthening of the yen would weigh on automakers' performance significantly. To make matters worse, steel prices have been on the rise.

The government will end its subsidy program for eco-cars in late September. The program has been a boost for domestic new car sales. In light of this, Toyota and Nissan plan to cut domestic production between July and September by about 20 percent.

Until year's end, major automakers expect passenger car sales to fall by 20 percent to 30 percent and minicar sales by about 10 percent. The future holds little to be optimistic about.

 

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