Toyota Motor Corporation, Japan's largest carmaker, expects to see its full-year 2020 profit plunge off a cliff as the COVID-19 pandemic keeps customers away and production plants closed worldwide.
It projects operating profit to crater by 80% to its lowest level in nine years as world economies grapple with an economic slowdown none were prepared to face. Toyota has forecast an operating profit of $4.66 billion for the year through March 2021, down 80% from $22.8 billion year-on-year. That will be its weakest profit since the 2011/12 financial year.
The unnerving demand slowdown has forced Toyota to predict global sales of just 8.9 million vehicles -- a nine-year low -- compared to 10.46 million year-on-year. Toyota reported a record-high 10.6 million car sales in 2019.
Now, however, Toyota expects to take a massive $13.95 billion hit from a fall in global vehicle sales this year due mostly to the pandemic. It does expect sales to recover to 2019 levels by 2021 at the earliest.
North America was the region hardest hit by the sales plunge. Sales fell 8% during the March quarter, resulting in an operating loss for the region. As a result, Toyota plans to slash production in North America by nearly a third through October.
"The coronavirus has dealt us a bigger shock than the 2008 global financial crisis," said President Akio Toyoda Tuesday at a live-streamed media briefing. "We anticipate a big drop in sales volumes, but despite that, we are expecting to remain in the black. We hope to become a leader in the country's economic recovery."
Japanese automakers predict a year of plummeting car sales as economists anticipate a slow and uneven recovery from the pandemic with people not rushing to spend, fearing a second pandemic wave. Social distancing practices will continue due to the absence of a vaccine against COVID-19. This could also crimp the desire to commute to work, moderating the need to buy new cars.
As a result, some analysts now predict a drop in annual global vehicle sales by around a third compared to an 11% fall in 2009/10 after the Great Recession.
Despite the unnerving financial data, Toyota said it will invest more than $9.33 billion each into capital expenditure and R&D investment, which is mostly unchanged in 2019. It's taken a credit line amounting to $9 billion from Sumitomo Mitsui Banking Corporation and MUFG Bank to hedge against rising fund-raising costs brought about by the pandemic.
"We cannot stop investing in the future," said COO Koji Kobayashi.
