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Toyota boosts profit forecast 34% after sales recovery in China, US

Japan car giant's chip crunch remains light thanks to communication with suppliers

Toyota's sales have been boosted by economic rebounds, particularly in China and the U.S. (Source photos by Akira Kodaka and Koji Uema)

TOKYO -- Toyota Motor on Wednesday revised its full-year net income forecast through March to 1.9 trillion yen ($18.1 billion), up 33.8% from its last prediction in November and down 6.7% from the previous year, as the Japanese car giant expands its robust sales momentum in the wake of COVID-19 despite the industry being shaken by semiconductor shortages.

Toyota estimates sales revenue will reach 26.5 trillion yen, up 1.9% from the previous forecast, as new models launched earlier this fiscal year are boosting sales, particularly in China and the U.S.

The company also said the group expects to sell 9.73 million vehicles through March, up 310,000 units from the November forecast.

While Toyota acknowledged the chip crunch is casting uncertainties on its outlook, the company denied the issue would slow down its production in the short term, unlike Honda Motor or Nissan Motor.

"We are also facing the global chip strain, but that does not mean we are reducing production," Kenta Kon, Toyota's chief financial officer, told an online earnings conference on Wednesday.

"It remains a risk, so we watch the situation by communicating on a daily or weekly basis with not only suppliers but also with chip manufacturers," he said, adding that the crunch might be resolved earlier than this summer.

Toyota CFO Kenta Kon speaks during an online news conference on Wednesday. 

Kon said there are several factors helping the company handle the chip crunch. Not only does Toyota keep semiconductor inventories sufficient for one to four months of production, but even in normal times it also had frequent communications with suppliers, to which it unveils production plans for up to the next three years.

"Our procurement division held teleconferences with suppliers around 10 times a day to discuss the latest situation," Kon said.

Many suppliers "say Toyota's orders are sure, and this has become a baseline of our relationship with suppliers even in tough times," Kon said. The company's system since the global financial crisis in 2008, when its supply chain was disrupted, to check for imminent production risks through multiple layers of suppliers is also serving well, he added.

Its peers are burdened by the recent chip crunch even as they emerge from the disruption caused by the pandemic.

Honda on Tuesday announced it expects vehicle sales for this fiscal year will drop by around 100,000 units from what it expected in November, when it increased its forecast. Nissan also said the same day it forecasts lower revenue for this fiscal year.

Kon estimated that chip prices may "rise to a certain extent" as a result of surges in demand from nonautomotive industries. Although many consumer electronics use different types of chips, he said, "it depends on communication whether chips are distributed to us."

Toyota posted a net income of 1.46 trillion yen for the April-December period, down 14.1% from the same period a year earlier. Its sales revenues reached 19.52 trillion yen, down 15%.

Toyota's unit sales have exceeded last-year levels since September, boosted by economic rebounds. Its plants in North America resumed operation before those of its U.S. rivals, in response to rising consumer demand. In China, its monthly sales have posted above the previous year's levels since April, and it had record sales in January, led by models including the Corolla and RAV4.

The company, which posted an increase in operating income in all global regions for the October-December quarter, expects to extend this recovery into growth in the next fiscal year starting from April, as it plans to produce a record 9.2 million units for January-December 2021, Nikkei has learned.

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