Toyota overseas production: July 2012 sets record, but then so did June, May, April, March, February and January 2012

by SR on August 31, 2012

Toyota overseas production (thousand units) for months of July 1999-2012

Shut up and drive

I come back from a brief holiday to find the Japanese press getting themselves worked up about Toyota’s overseas production July 2012, which was “the highest ever figure for July”. Well, yes, that’s true, but Toyota’s overseas production has set a record in every month so far in 2012. Why get excited about July in particular? It’d be nice if the media would shut up and reduce the overall level of noise on around non-events like this. We already know Toyota’s having a great year and the stock is up 20% to reflect that, whereas the Topix index is flat for the year. The key issue is at what point we think the share price of Toyota (and affiliates like Denso) has reached its peak.

My conclusion is that there’s still some relative upside left in a nervous market like this, because investors want to stick with stocks that are known quantities and that are seen (rightly or wrongly) as ‘safe’. The corollary is that investors are allergic to sectors (like machinery) where there might be negative news even though that news should by rights already have been fully discounted. Even if the good news on Toyota is well known, holders may prefer to keep holding.

Share price performance of Toyota and other auto-related stocks

Still, just by way of confirmation of the facts, the chart at the top of this page shows overseas production at Toyota for all the months of July since 1999. Two things to note.

  1. Rising trend, interrupted. Toyota arguably still has too much production in Japan, but that doesn’t mean that it was not growing its overseas production capacity in the decade leading up to the global financial crisis of 2008. Between 1999 and 2007 the company effectively tripled its production outside Japan, no mean feat even for a giant like Toyota. It’s also logical in the context of demand growing more rapidly overseas than in the home territory.
  2. 2011 should have been a record but… July 2009 was lower than July 2008, but that was the bottom and overseas output rose in July 2010 and would in my opinion have set a new record of more than 350,000 units in July 2011 had it not been for the earthquake that hit Northern Japan in March 2011. So that rising trend had already resumed after a 2-year break in 2008-2009.

The chart below may make things a little clearer. Overseas production in 2012 (the red line) has been well above every other year for the past five years, including 2008 (the green line). The earthquake severely disrupted the supply chain, causing shortage of key components and thus sharply depressing 2011 overseas production – the blue line in the chart below.

Toyota overseas production by month and year

And here’s Toyota’s overseas production on a cumulative basis. You can see that the red line (2012 overseas production) has been above even the very strong 2008 for the whole of the year so far.

Toyota overseas production, cumulative year-to-date (million units)

Previous post:

Next post: