Toyota Earnings Report
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Toyota Earnings Report

    Toyota was 3rd in 2017 annual global unit sales, behind Volkswagen and the Renault Group.

    Renowned automotive analyst Takaki Nakanishi predicts fairly robust earnings for fiscal 2017, but he also points out that it's mainly because of external factors such as the currency market and tax cuts.

    "Toyota has already revised upwardly their guidance twice during FY17, and I think further upside is possible. Operating profits benefit from better than expected financing environment, benefit of weaker yen. Toyota is a big beneficiary of a tax cut in the US which will start to implement in January this year. So I basically expect bigger amount of a reversal of a tax asset liability which should boost Toyota's net income. So I think Toyota's earnings are better than expected, but it's not really coming from Toyota's strong secular factor."

    Nakanishi feels that while Toyota's strategy to invest in the future is the right way to go, the company may be somewhat missing its main target.

    "Toyota is investing in AI, autonomous vehicle technologies, mobility as services, and platform building. So huge R&D and also capital expenditure is actually soaring drastically. Overall strategy is going for the right direction in my view. However, looking into Toyota's recent products, I feel kind of expensive toward the higher-end mix. Good product and good value is the origin of Toyota's mass brand value. And probably Toyota is missing that part of the value of the brand, so that I think is something that Toyota need to balance."

    He forecasts a solid 2018 for the company. But he says officials need to keep watch of possible short to mid-term risks.

    "At this point, biggest risk factor is currency. Should yen hit 105.5, higher than the current assumption110, is probably quite significant, which may lead to push down Toyota's operating profits to more than 10 percent. Next risk issues are trade issue, including NAFTA, also any kind of bilateral discussion between US and Japan, because the automotive sector is the biggest source of trade deficit in the US. The problem is we don't know what is going to happen."