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Equities

Toyota tries new approach to communicate with financial market

Automaker now goes beyond numbers and reaches for deeper understanding

  © Reuters

NAGOYA, Japan -- Toyota Motor is trying to change the way it communicates with the financial market, in a radical switch from its traditional focus on simply analyzing results.

The automaker tends to explain its medium- to long-term management visions more often these days. It is stepping up its efforts to foster deeper understanding among investors. This should help it raise its stock price, which has been lagging.

"Our press conferences on earnings usually focus on figures, but this time we asked Mitsuru Kawai to come and talk, as we would like you to understand our company better," said Koji Kobayashi, a Toyota executive vice president, on Feb. 6 at the start of a press conference on the company's results for April-December 2017. Kobayashi was named Toyota's chief financial officer on Jan. 1.

After a company official explained the earnings for about 10 minutes, Kawai, another executive vice president, appeared and gave a presentation, using about the same amount of time. He presented images of calligraphic characters written by robots and explained how their performance varied depending on the proficiency of whoever programmed production skills into the machines.

His message, on the importance of training technicians who support manufacturing operations, had little to do with earnings, but its intent was different.

Koji Kobayashi, a Toyota executive vice president, talks to the media on Feb. 6.

Toyota, which does not often publicize its business plans, began to change significantly last year. The company now wants investors to better understand its operations.

The first opportunity for the company to display its new policy was at an Investor Summit it held in Texas in September 2017. During the event, its first explanatory meeting for large institutional investors, President Akio Toyoda took about an hour to talk about Toyota's history and its work on advanced technologies, including electric powertrains, autonomous cars and connected cars.

At the Tokyo Motor Show in October 2017, Toyota announced its plan to put solid-state batteries, which can substantially increase electric vehicles' driving range, into practical use in the first half of the 2020s. At the end of last year, the company announced that it will raise the percentage of electric vehicles sold, including hybrid vehicles, to 50% by 2030. Toyota has increased the number of opportunities for explaining its medium- to long-term vision, and the recent press conference on earnings was such an occasion.

One reason for the change at Toyota is that the company wanted to bring it closer to investors. Its consolidated net profit for the fiscal year through March 2018 is expected to hit a new record level for the first time in two years. The stock market's perception that Toyota is rather slow in developing EVs and self-driving technologies has been fading.

However, the company's stock price is lagging, while there is concern that the U.S. market for new cars may be peaking.

Toyota's stock price has risen 8% since the end of 2016, much slower than Germany's Volkswagen, at 22%, and the U.S.'s General Motors, at 16%. Among Japanese automakers, Honda Motor has risen 11% and Suzuki Motor, which performs strongly in emerging countries, has advanced 45% in the same period. The Nikkei Stock Average rose 11%.

The automobile industry is experiencing a time of enormous change, and it has become inappropriate to base investment decisions on an automaker's latest earnings alone.

For example, U.S. electric car maker Tesla, which is operating deeply in the red, temporarily surpassed General Motors in market capitalization, so expectations for future competitiveness have greater weight in making current investment decisions. Investors increasingly want to see what returns they can expect from what amounts of investments in fields with high expectations for the future, such as advanced technologies and connected car technologies.

Apart from Kobayashi and Kawai, Toyota has four executive vice presidents. They supervise the company's mainstay passenger cars, advanced technologies and connected car technologies. The company said it is considering providing occasions at future press conferences for executive vice presidents to explain the fields they manage.

Of course, there is the danger that more themes in communications could result in a blurred focus. At the Feb. 6 press conference, there was not enough time to explain the company's earnings in detail because the executives were presenting various kinds of information, and the starting time was changed to 4:30 p.m. from the previous 3 p.m.

After the presentation, reporters surrounded a Toyota public relations official and peppered him with questions on details. Toyota's press conference on earnings for the year through March 2018, to be held in three months, will be an opportunity to see how the company deepens its attempts to scrupulously explain itself.

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