Global Insight Perspective | |
Significance | Toyota President Katsuaki Watanabe has stated that the company intends to increase combined global sales by 20% from the 2005 level to 9.8 million units bv 2008. |
Implications | If Toyota achieves this target it will be unchallenged as the world's number-one carmaker by sales and production volume. Watanabe also announced a significant increase in its profit forecast for the first half of the current financial year, as well as plans to increase research and development spending by taking on 8,000 new engineers. |
Outlook | Toyota's latest statement on its future strategic plans is further evidence of a company at the very peak of its powers. Increased investment in research and development and improved efficiencies will further secure its position as the dominant player in the global automotive industry. |
Toyota Targets 20% Global Sales Increase Between 2005 and 2008
Toyota has stated that it intends to increase its global group sales to 9.8 million units by 2008, a rise of 20% on its most recent actual figure of 8.13 million units, recorded in 2005. In a presentation to journalists in Tokyo, President Katsuaki Watanabe said that he expected this figure to break down in the company's principal markets to sales of 3 million units in North America, 2.4 million units in Japan, 1.3 million units in Europe and 1.7 million units in the wider Asian region, excluding Japan. The figures include projected global sales of Toyota Group companies, small carmaker Daihatsu and truck manufacturer Hino.
Toyota Also Significantly Raises H1 2006/07 Profit Forecast
At the same presentation, Watanabe also announced a re-stated profit forecast for the first half of the 2006/07 financial year (FY). Toyota raised the forecast for its first-half FY 2006/07 parent-only profit by 46%, equating to a figure of ¥540 billion (US$4.6 billion), in the six months between the start of April and the end of September. This was up from the figure of ¥370 billion that was forecast for the period in May. Toyota said that strong overseas sales and the weaker Japanese currency were principal factors behind the re-stated forecast. At the same time Watanabe also stated that Toyota is working to increase its operating profit margin by 10%, although he did not specify a timescale for this goal.
R&D Spending Increases Also Planned
As well as the positive news surrounding sales and profit forecasts, Watanabe also underlined some of Toyota's plans to consolidate its current position. He said, "We will construct new plants and expand existing production capacity in markets where we can expect growth going forward. By doing so, we hope to better capture growth opportunities. To support the higher level of growth, the Toyota Group will hire some 8,000 technology staff bv 2008."
Outlook and Implications
On initial examination, the news of rising profits and sales appears to suggest that Toyota's inexorable progress looks set to go unchallenged in the foreseeable future. However, there are a number of factors that could see Toyota's ambitious 2008 sales forecast come under pressure. The growth projections appear to rely heavily on Toyota's progress in the United States remaining unchecked. The U.S. economy is somewhat delicately poised at the moment as a result of high oil prices and high levels of consumer debt. An increase in interest rates could see a significant contraction in the economy and put a dent in Toyota's target of selling 3 million units in the market by 2008. The company is also looking to China to support global sales growth, where it faces increasing competition from domestic carmakers making low-cost own-brand models. However, Toyota is obviously confident of global sales growth and is looking to up its overseas production levels by 40% by 2008 (see World: 18 September 2006: Toyota Plans 40% Rise in Overseas Production by 2008—Report). In addition, the company's continuing high investment in research and development (R&D) bodes well for Toyota's efforts to maintain its current competitive advantage over its ailing U.S. rivals General Motors (GM) and Ford.