Toyota Expects A Collapse

We may earn a commission from links on this page.
Image for article titled Toyota Expects A Collapse

With pickup truck sales staying strong, factories slowly reopening, and car sales in China increasing for once, we’re firmly in the “recovery” period for coronavirus in the auto industry, right? Toyota doesn’t think so. All that and more in The Morning Shift for Tuesday, May 12, 2020.

1st Gear: Toyota Expects 80 Percent Drop In Profits

Surely a company that sells a full-size pickup truck in America can’t be feeling too bad about the prospect of selling cars in the rest of 2020! Er, no. Not really. Toyota expects bad times, and some real bad shit for the rest of the year, as the Financial Times reports:

“The decline in vehicle sales will be bigger than during the Lehman crisis, but because we will be able to remain profitable, we can continue to make investments for the future” in areas including self-driving technology and smart cities, said Akio Toyoda, chief executive, during an online news conference.

For the fiscal year ending in March 2021, Toyota said it expected an operating profit of ¥500bn ($4.6bn) compared with ¥2.4tn in the previous year. That was significantly below analysts’ expectations of ¥1.8tn in profit, according to S&P Global Market Intelligence, and would mark Toyota’s weakest annual performance since the 2011-12 fiscal year when Japan was devastated by a massive earthquake and tsunami.

The group said it also expected its global vehicle sales to drop from 10.5m in its previous fiscal year to 8.9m in the current period, prompting Toyota’s Tokyo-traded shares to fall 2 per cent on Tuesday.


The real question remains not if or when the recovery will happen, or even in what ways, but what we will have lost in the process.

2nd Gear: Honda And Mazda Drop, Too

Hm. Maybe Toyota is an outlier! Or, uh, maybe not, as Automotive News reports on Honda:

Honda plunged to a 5.6 billion yen ($51.9 million) operating loss in the latest quarter amid slumping sales as the coronavirus pandemic hammered the global economy.

Operating profit swung into the red in fiscal fourth quarter ended March 31, from 42.3 billion yen ($392.4 million) the year before, the automaker said in its earnings report on Tuesday.

Honda also booked a 29.5 billion yen ($273.6 million) net loss in the three-month period.

Revenue shriveled 15 percent to 3.46 trillion yen ($32.09 billion), as worldwide sales fell 28 percent to 981,000 vehicles in the January-March quarter.


Oh, and Mazda, too, as Automotive News also reports:

Mazda Motor Co. slashed its profit guidance for the just-ended fiscal year, warning that net income will plunge 81 percent because of the impact of the COVID-19 pandemic.

Net profit will tumble to 12.1 billion yen ($112.2 million) in the fiscal year ended March 31, the company said in its Tuesday notice to investors. The company had earlier predicted net income would take a lesser 32 percent fall to 43.0 billion yen ($398.8 million) in the 12-month period.

Operating profit is now see falling 47 percent, worse than the earlier outlook for a 27 percent decline. Mazda sees global sales retreating to 1.419 million vehicles. That is also downgraded from the Japanese carmaker’s earlier forecast for a 4 percent sales slide to 1.5 million units.


A fuller report is expected before the week is over, so I’m sure there is yet more good news to look forward to.

3rd Gear: Russian Car Sales Crash Has Much Better Name Than Rest Of Us

We understand that car sales have plummeted and profits have collapsed, but what we don’t have is a good name for it. Enter Russia’s “Black April,” as Bloomberg reports:

Russian car sales declined the most on record in April, the first concrete sign of the toll a nationwide lockdown has taken on the economy, as dealers were forced to close down in an effort to contain the spread of coronavirus.

New car sales fell 72% from a year earlier to 38,922 vehicles, according to the Association of European Businesses in Moscow, which said the decline was the biggest monthly decrease since it began tracking the metric in 2007.

“‘Black April’ 2020 strongly challenged dealer liquidity and mid-term even their sustainability,” Thomas Staertzel, Chairman of the AEB Automobile Manufacturers Committee, said in a statement Tuesday. “Dealers are preparing for restart, although I do not expect much better sales results in May.”


4th Gear: China’s New Energy Vehicle Sales Down 43 Percent

China’s EV scene has always been supported by heavy government subsidies and was always, to some degree, hanging by a thread even in the good times of high sales. When that gets threatened, though, things drop, as Reuters reports:

Challenged by the arrival of Tesla Inc. in China last year, domestic electric vehicle start-ups were struggling even before the economic shock wrought by the coronavirus, but now for some it has become a battle for survival.

New energy vehicle sales fell for a tenth straight month in April, plummeting 43 percent from a year earlier in a market that has now got 50-or-so established start-ups competing with domestic giants like Geely, state-owned FAW Group , and foreign brands such as Tesla and Volkswagen Group.

“The difficulties that EV start-ups have encountered, such as the auto sales decline, harsh fundraising environment and subsidies reduction, all started last year,” said Brian Gu, president of Alibaba-backed Xpeng Motors.

“The outbreak will aggravate these issues that already had existed,” said Gu, whose firm delivered 16,000 vehicles in 2019.


Now, Reuters is sort of considering this a fundamental threat to the EV industry in China as a whole saying that they are “running out of road.” I’m not sure if it’s that drastic, given the very nature of a government-supported-startup scene, but we’ll see.

5th Gear: Please Enjoy This Article Speculating About How EVs Could Save Small Cars

Any human who has paid attention to new cars at all over the last 10 or 20 years would tell you about the rise of EVs from glorified golf carts to punitive compact cars to normal and desirable vehicles. It is within that context that you might enjoy this speculative article from Automotive News Europe explaining how tough emissions regulations for European-market supercompacts might push the whole segment into EVs. It’s good shit:

European car buyers still want minicars, for their ease of parking, low cost and fuel efficiency. But automakers say new emissions rules that require costly modifications are making them economically unfeasible.

So, how can the key entry-level segment be saved?

In some cases, automakers are offering electric versions of existing models. In others, they are blurring the line between minicars and models one size up. A few players, including some new entrants, believe that limited-range electric quadricycles are the answer.


Reverse: ‘Super Tex’ Is Born

Via History:

On May 12, 1957, race car driver A.J. Foyt (1935- ) scores his first professional victory, in a U.S. Automobile Club (USAC) midget car race in Kansas City, Missouri.


Neutral: What Is Your Boss Telling You About Coronavirus?

Is your work telling you that things are tough but we’ll get through this, or are people saying to keep heads down and expect for rougher times ahead? Or do you work for Amazon?