Toyota global production: no change in positive trend – perhaps through to December

by SR on September 27, 2012

Toyota global production by month and year (thousand units)

Outperformance relative to previous high of 2008 widens

Conclusion: no change in trend or worrying figures in the August 2012 production data for Toyota; meanwhile forecasts in trade press suggest continuation of strength through December 2012. The major Japanese auto OEMs announced production figures for August 2012 on 26 September. Our focus is on Toyota, which has been our main long call this year along with affiliate Denso. Toyota’s global production in August was 693.2 thousand units (see chart above), rising 10.6% year-on-year and falling 9.4% month-on-month. Note how in the graphic above, 2012 sales (the red line) are far ahead of not only the blue line of 2011 sales but also the green line of the very strong 2008.

For January to August 2012, Toyota’s global production reached 6.08 million units, up 44.8% over the same period the previous year (see chart below). That impressive increase is a result of the easy comparison with 2011, which was in turn caused by the North Japan earthquake of March 2011 that severely disrupted Toyota’s production systems. Still, 2008 was a good year for Toyota and you can see from the chart below that Toyota widened the gap in output between 2012 and 2008 (the green line).

Toyota cumulative global production year-to-date (million units)

Note that Toyota’s domestic production in August 2012 came to 262.2k units, falling 23.2% compared to July 2012. As we mentioned in this post from 10 September 2012, OEM tyre sales in Japan for August fell by 20.4% month-on-month, showing again that Japan tyre sales data provide a good lead on auto production in Japan at least two weeks before the official auto output data is released.

Negative year-on-year figures in September?

In September 2011, as Toyota was beginning to recover from the impact of the earthquake, global production rose to 735k units. If we take a look at the chart at the top of this page, we see that there was a sharp uptick from the previous month in September 2011, a jump that looks quite challenging to achieve in September 2012. Could we see the year-on-year growth in September 2012 fall to nothing or even go negative? I think this is one of those times that the visual presentation of the data is a bit misleading. In reality, since the year 2000, the median change in Toyota’s global output for the month of September has been +19.2% relative to August. Toyota’s global production in September 2011 rose 17.3% relative to the previous month, so if anything it was a little bit worse than the long-term trend. Back in 2012, taking the 693.2k units produced in August and applying this median change of +19.2% gives us 826.3k units for September 2012. That would be an increase of 12.4% over September 2011.

If we look at bit more closely, the ‘rest-of-world’ segment of production (which includes China, Europe, Indonesia and India) typically grows by 15-20% in September relative to August, but I think that’s a bit optimistic this year due to the problems in China. Here’s a little scenario for Toyota’s production in September 2012 by region.

  • Japan – rising 20% from August 2012 to 315k units.
  • North America – flat compared to August 2012 at 155k units.
  • Rest-of-world – rising 10% from August 2012 to 305k units.

This comes to a total of 775k units in September 2012, which would be an increase of 5.4% year-on-year. In North America, Toyota has the equivalent of 48.7 days of supply in inventory in August 2012, which while not bad overall, probably translates to uncomfortably low stock for some models. If Toyota boosts output to cover this there could be upside to the 155k units predicted for North America September in our scenario above. In summary I expect the year-on-year growth to slow in September 2012, but not reverse. This does beg the question of whether the output figures reverse in October, November or December – the market hates negative figures – but because production in the final quarter of 2011 was hit by the floods in Thailand, I think we will escape negative year-on-year growth in production for 2011. The spring of 2013 is a different issue and could put a stop to the outperformance of Toyota’s stock relative to its Japanese peers.

Toyota days sales in inventory for the US market (to August 2012)

The outlook for Toyota’s December production

In related news, an article in the 27 September edition of the Nagoya-based Chubu Keizai newspaper (which has close contacts with the Toyota group) reported that the 3-month rolling production forecast (the naiji) for Toyota in Japan in October-December has been decided. December output is expected to be about 12,500 units per day, slightly higher than October and November, but not a major change. For an overview of the naiji and its relevance, see this post from April 2012. The article also mentions that Toyota is assuming that exports to China will be zero in October 2012, although it plans to keep local production in China relatively high to compensate. Overall, no real surprises here, though Toyota may be somewhat pessimistic in assuming no exports to China.

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