Toyota raised its full-year profit forecast as the yen’s rally stopped short of levels the automaker predicted, providing some respite from a sales slowdown that’s threatening its position as the world’s top seller.
Operating profit will probably be 1.7 trillion yen ($16.3 billion) for the year ending in March 2017, compared with the 1.6 trillion-yen forecast the Toyota City, Japan-based company made in August. Second-quarter net income fell 36 percent to 393.7 billion yen, beating analysts’ estimates.
A peaking U.S. auto market, tepid demand for the new Prius hybrid and a dearth of other major new models in its showrooms have dragged Toyota behind scandal-hit Volkswagen in global deliveries this year. The stronger yen is also reducing the value of record deliveries of RAV4 and other sport utility vehicles in overseas markets and making exports of Japan-made Prius and Lexus luxury vehicles less competitive.
“Going forward, our external environment is likely to remain challenging with the yen appreciation and ongoing changes in market conditions,” Executive Vice President Takahiko Ijichi said Tuesday at a press conference in Tokyo.
Weaker earnings aren’t keeping Toyota from continuing to return some of its hefty cash pile to shareholders. Toyota will buy back as much as 1.31 percent of shares for 200 billion yen, the company said.
Toyota is now operating with the assumption that future expansion of the global auto market will entail plateauing or shrinking developed markets, balanced by higher demand in emerging countries, Chief Competitive Officer Didier Leroy told reporters last month.
“If you consider the next, let’s say 20 years, the growth of the business for the automotive industry will not come from more and more sales,” Leroy said. “It will come from a lot of other services,” including car- and ride-sharing, connectivity and data management.
The technological shake-up has spurred Toyota to form a series of alliances. The carmaker made investments in ride-sharing leader Uber Technologies in May and car-sharing startup Getaround last month. It will begin pilots with both companies by early next year.
Toyota has been discussing at least 10 different areas for deeper cooperation with Mazda Motor Corp., from electric vehicles to connected cars. President Akio Toyoda has also been exploring joint research and development with Suzuki Motor Corp. that could cover similar fields.
As for its current lineup, Toyota’s newly redesigned Prius that began production in late 2015 has been struggling in the U.S., with deliveries dropping 12 percent this year through October. Sales for the entire Prius family have plunged 28 percent when including older versions and the plug-in hybrid that recently returned from hiatus.
The trend is alarming for a model line that was in decline for several years leading up to a substantial overhaul, with Toyota promising a sportier ride and improved safety and tech features. Prius has instead been the most significant drag on a passenger-car lineup in U.S. that’s seen sales decline 10 percent so far this year.
The next significant new model Toyota has will be the C-HR compact SUV, which will join a rapidly expanding segment that includes Honda Motor Co.’s Vezel and Nissan Motor Co.’s Juke. Dealers in Japan began to take orders for C-HR early this month.