Toyota global production: mediocre 2013 likely

by SR on January 29, 2013

Toyota global auto production by month and year

  • Conclusion: Autos preferable to auto parts. Given that Toyota itself is forecasting 0% growth in vehicle production and 3% growth in sales for calendar 2013 it’s unlikely that market participants have great expectations for auto output. With Toyota’s sales predicted to be higher than production and with the yen weakening, the auto OEM stocks (Toyota itself, or maybe Daihatsu) make more sense than parts suppliers like Denso. The much-maligned machinery sector may be more lucrative than either and it will be interesting to see how the market reacts to the downward revision to guidance from Komatsu earlier today.
  • 2012 exceptional, unlikely to be repeated. In 2012 Toyota’s global production came to 8.74 million units, according to a company update on 29 January 2013. That’s an increase of 26.1% year-on-year, which reflects the low level of output in 2011 due to disruption caused by the Northern Japan earthquake in March and the Thailand floods in November. In the chart above, Toyota’s global production is shown by the blue line, which dips sharply in March, April and May 2011 and again in November 2011. The red line represents 2012 output and it was in absolute terms a good year, exceeding the green line of 2008 in most months.
  • Sales (not production) the star in 2013. Toyota’s official guidance is for 0% growth in production and 3% growth in sales volumes for calendar 2013. While Toyota is likely low-balling, its forecasts do indicate that it expects to have to rein in production to absorb inventory. That might be a function of Toyota’s busy launch schedule in 2013, in preparation for which management will want to squeeze as much old model stock out of the system as possible. Remember that it is production that drives sales at the parts suppliers, so they benefit immediately from a ramp in output that will not be converted to revenue for the OEM for at least 3 months (cars need to be shipped to destination and sold first). Conversely, when sales grow more quickly than output, the suppliers should not do as well as their customers, the OEMs. Incidentally the ‘unofficial’ rolling-three month production forecast for Toyota in Japan (the naiji) does point to a decline from 14k units per day in February and March 2013 to about 12k units per day in April 2013. (See this post for more on the naiji.)

Toyota cumulative global production by year

  • Weaker yen favours OEMs. As a percentage of operating profit, a 1-yen shift in the exchange rate for the US dollar has roughly double the impact on Toyota than (say) Denso, because the group suppliers sell in yen to Toyota in Japan, but Toyota exports the resulting vehicle and sells it in another currency, typically US dollars. Toyota in effect shields the suppliers from the impact on exported cars of fluctuations in the currency. Conversely, when the yen is weakening, Toyota benefits more.

Edit: Below I have added charts showing the cumulative output by year for Toyota in Japan; overseas (all regions); North America; Rest-of-World (including Europe, Thailand and Indonesia).

Toyota cumulative auto production by year in Japan

Toyota cumulative auto production by year overseas

Toyota cumulative auto production by year in North America

Toyota cumulative auto production by year in Rest-of-World

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