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Toyota Motor Corp. Is Gearing Up for a Better Future

May 09, 2014 | About:

World's largest carmaker Toyota (NYSE:TM) is headed for a better 2014. Toyota has an ambitious plan to extend its lead over the other automakers despite facing certain issues like product recalls. The company will be introducing new models in the future as it focuses on keeping its momentum going in the U.S. market. Toyota is also looking to profit from emerging markets with its budget models

Focus on Lexus

Toyota plans to be more aggressive on the styling front, and gave a glimpse of this at the January Detroit Auto Show where the carmaker showcased the all-new Lexus RC F performance coupe. It's expected to hit showrooms later in the year. The company already rolled out the new Lexus CT hybrid in January, and is currently considering whether or not to release the premium LF-NX crossover that it unveiled in the Tokyo Motor Show last November.

Recently Lexus received a valuable endorsement by topping Consumer Reports' annual car brand report cards for a second straight year.

Recent Financials

TM has announced its full-year earnings for the period that ended on March 30. Along with stellar earnings, the Japanese car manufacturer reported it sold 9,116,033 vehicles. This means Toyota has a reasonable chance to maintain its position as the world's top car company. On a consolidated basis, net revenues for the period totaled 25.69 trillion yen, an increase of 16.4 percent compared to the previous fiscal year. Operating income increased from 1.32 trillion yen to 2.29 trillion yen, an increase of 971.2 billion yen, while income before income taxes was 2.44 trillion yen. Net income increased from 962.1 billion yen to 1.82 trillion yen.

In Japan, vehicle sales totaled 2,365,410 units, an increase of 86,614 units. Operating income from Japanese operations increased by 933.8 billion yen to 1.51 trillion yen.

In North America, vehicle sales totaled 2,529,398 units, an increase of 60,594 units. Operating income increased by 104.1 billion yen to 326.0 billion yen, including a loss of 15.5 billion yen due to valuation gains/losses from interest rate swaps. Operating income, excluding the impact of valuation gains/losses from interest rate swaps, increased by 152.7 billion yen to 341.5 billion yen.

In Europe, vehicle sales totaled 844,003 units, an increase of 44,918 units, while operating income increased by 31.7 billion yen to 58.2 billion yen.

Emerging Markets Look More Promising

Luxury cars are selling at a speedy clip in emerging markets such as China, India and the Middle East. Lexus is already popular in the Middle East, where it registered an impressive 19% growth by delivering 37,284 units last year, and is preparing for a bigger battle in China and India.

The day isn't that far when the U.S. would have to pass on the crown as the largest premium car market to the increasingly sophisticated Chinese market. As per McKinsey and the Organisation for Economic Development and Cooperation, China is the fastest-growing luxury car market, and is estimated to surpass the U.S. by 2016.

Managing director of Toyota India, Naomi Ishii, counts the Indian subcontinent as one of the important target markets, saying, "The entry of Lexus in India is only a matter of time." The premium car segment in India expanded 15% year over year in 2013, according to the Confederation of Indian Industry and Indian researcher IMRB International, and is expected to keep growing at the same rate.

Camry Facelift

Camry has long dominated the midsize sedan segment and has been known for its fuel efficiency, safety and reliability during its 12-year stay at the No. 1 spot. While Toyota's Camry was again named the best-selling midsize car in 2013, that isn't the whole story. That ranking takes more into account than just sales to typical car buyers. In terms of sales to actual individual car buyers, or retail sales, another vehicle edged out the Camry for the top spot in 2013. In addition to that, other challenges loom for Toyota's Camry, and 2014 could be the year the king of the midsize segment is finally replaced, for good.

The heavily revised 2015 Toyota Camry has been revealed, stunning the assembled media at the 2014 New York auto show. Dubbed the “big minor change,” the updated Camry brings significant exterior and interior styling modifications over the current car, which went on sale just over two years ago in March 2012.

All of the exterior panels except the roof turret have been changed, meaning new doors, boot, bonnet, lights and bumpers have been adopted. As a result, Toyota claims the new model – which will be on sale in the U.S. around September and will launch in Australia in 2015 – is more emotional than the car it replaces. According to the brand the front-end styling is “all about attitude.” The XSE model shown at New York features LED headlights, a new bonnet with a more sculpted appearance, revised headlights and a gaping blacked-out grille. The rear looks more refined, with new tail-lights, a softer, more curvaceous tailgate and more flattering rear bumper.

The new Camry’s interior has also been significantly updated, with “almost every surface that driver and passengers touch” seeing changes.Those revisions include a new center stack, new seats and a new steering wheel. There’s also a revamped audio system with revised touch-screen media screens of up to 7.0 inches in diameter, and the U.S. will see Camry models sold with a high-tech wireless phone charging system. There is also 30 percent more carpet insulation for better cabin comfort, and the side mirrors have been pushed further from the body of the car for reduced wind noise.

To End

Toyota is the leading manufacturer of hybrid vehicles. Over recent years, demand for Toyota's Prius hybrid car is strong due to high gasoline prices. Hybrid cars emit less CO2 emission. Nowadays customers are more willing to buy hybrid cars because they are more aware of the negative effects (air pollution) caused by cars. Other automakers are trying to bring more hybrid cars to the market, but customers are not much impressed with the U.S. hybrid technology as they are with that of Toyota models. Toyota understands that environmental friendly cars are the necessity nowadays. By the end of 2015, Toyota plans to present 15 new or improved hybrid vehicles that will help the company to satisfy varying consumers' tastes and needs.

Toyota's main markets are Japan, US and Europe. The company plans to expand into the emerging markets. Toyota is spending significantly in Indonesia, India and Brazil to boost production. By 2015, Toyota plans to generate 50% of its revenue from emerging markets, a 5% increase from 2011.

Competition in the auto industry is increasing. Toyota's strong brand name and innovative culture will allow the company to expand in the future. The weak yen will continue to benefit the company in the future. Investors interested in auto stock should consider Toyota. In my opinion, Toyota will provide its shareholders with nice, steady returns over the next few years.

Rating: 5.0/5 (1 vote)



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