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2016-08-04 14:19

TROUBLED TIMES: Toyota's says sales fell in Q1 as a strong yen slashed earnings for the Japanese automaker. Image: AP/ David Zalubowski


Toyota puts a bakkie through its paces by deliberately rolling it in a simulated crash.

Tokyo - Toyota said Thursday its April-June net profit tumbled nearly 15% on-year, hit by a sharp rally in the yen and falling North American sales, while it also trimmed full-year profit and sales forecasts.

The world's top automaker posted a $5.4-billion net profit in its fiscal first quarter, down from 646.4 billion yen in the same period last year, while revenue fell 5.7% to 6.59-trillion yen.

The Corolla and Prius maker's latest results underscore the negative impact that a resurgent yen is having on Japanese firms doing a lot of business abroad.

Japanese economy in trouble

Japan Inc reaped windfall profits over the past few years as Tokyo's efforts to kickstart the world's number three economy sharply weakened the currency.

That was good for firms such as Toyota and rivals Honda and Nissan because repatriated foreign profits were worth more when the yen was weak and it made them more competitive overseas.

But the currency has rallied since the start of the year as volatile equity markets and Britain's vote to exit the European Union pushed investors into the unit, which is seen as a safe bet.

Toyota, which also reported a fall in quarterly operating profit, cited the yen as a reason for tweaking its forecast for the fiscal year to March 2017.

North American flailing sales

The company now expects net profit of 1.45-trillion yen on revenue of 26-trillion yen, compared with 1.5-trillion yen and 26.5-trillion yen previously forecast.

The newest figure will be Toyota's first profit decline in five years and way down from a record 2.31-trillion yen net profit in its most recently ended business year.

Rakuten Securities analyst Yasuo Imanaka said: "The yen's rise is the top concern for Japan's auto industry right now. 

"On top of that, demand in North America, the industry's cash cow, seems to be losing momentum.

"It's going to be a tough year for the industry."

Defects, quakes

Toyota's vehicle sales rose slightly in the latest period, ticking up in Japan, Europe and Asia but falling in the key North American market. Overall, the company sold 2.17 million vehicles in the quarter.

Japanese automakers have benefited from healthy growth in the US where low interest rates boosted demand, although the possibility of interest rate hikes this year could dampen sales.

Unsteady demand in emerging markets such as Thailand and Indonesia have also been threatening the industry's bottom line.

Takata scandal 

Toyota and other major automakers are at the same time wrestling with costs linked to a huge scandal at supplier Takata.

A defect in the firm's airbags has been linked to 13 deaths and scores of injuries globally, prompting a massive recall to replace the problem parts and meaning huge expenses for automakers.

Some of Japan's biggest firms, including the huge auto industry, were also hit by temporary factory shutdowns in the south of the country after huge earthquakes caused major damage and claimed dozens of lives in April, affecting production.

Toyota's biggest domestic rivals likewise reported a drop in their quarterly results.

On Tuesday, Honda blamed an income tax rise for its April-June net profit slipping 6.1% to 174.6-billion yen, although that beat market expectations partly owing to stronger sales in China.

Read more on:    toyota  |  tokyo  |  industry news

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