Toyota production: August auto output to remain high

by SR on May 28, 2012

Toyota rolling order information suggests a strong August

Toyota production globally hit a record high in March 2012

  • Conclusion: Toyota production to remain high, parts suppliers should have great results for first half of FY3/13. I’ve already made the point several times that Toyota’s production this year is going to soar, and the graphic above shows that in March 2012 Toyota’s production globally hit a record high. Looking forward a few months, an article in the 26 May edition of the Chubu Keizai daily newspaper suggested that Toyota’s production in Japan in August will come in at around 15k units/day. Japan production remains important because Toyota exports about 45% of its output and so it has an impact on global sales. By my calculations that 15k/day figure is equivalent to 270k units, which would be an increase not only over August 2011 but also 2010, 2009 and even 2008. (Click on the chart below for larger image.)

Toyota production in Japan by month (thousand units)

  • Seasonality returns to normal. In a previous post I discussed Toyota’s rolling 3-month order forecast for its Japanese production (the “naiji”) and noted that it is subject to change and so should be treated with caution. Nevertheless, based on this latest naiji figure I’m expecting July production in Japan of about 341k units, so the 270k units I forecast for August would be a decline of 20.8% month-on-month. As the image below shows, a sequential decline of 20-25% in August is normal for Toyota and is caused by the the O-Bon holidays in August. The major manufacturers in Japan typically take a week off and I assume that this will happen from 11 to 15 August 2012. This would seem to confirm my view that the “catch-up” phase of Toyota production has already finished and that over the summer we will see the typical seasonal moves. So, to summarise, I expect NORMAL seasonality but a very high ABSOLUTE level of output at Toyota over the summer and into the autumn. Note that in August 2011 Toyota was trying to mitigate the impact of the March 2011 Northern Japan earthquake and tsunami, so the month-on-month decline in August last year was abnormally small. That’s unlikely to happen in August 2012.

Toyota production in Japan by month (thousand units)

  • Look at Japan auto parts, seriously. In a recent post on Japan machinery orders I pointed out that machinery output in Japan is barely tracking above the previous year, whereas Toyota’s output year-to-date is not only well ahead of 2011 but also ahead of the very strong 2008. The key issue here is that volumes are going to be very strong and that Toyota-related parts suppliers (not only the Japanese firms, mind you) are going to benefit from the surge in capacity utilisation this should generate. If you want to put money somewhere in a bombed-out market (see Topix’s disappointing performance year-to-date relative to that of other global indices) then auto parts stocks such as Denso or Aisin Seiki should be high on your list of candidates. Remember that Toyota has to make, ship its product in some cases halfway round the world, put it into the distribution channel and sell it before it recognises revenues whereas parts suppliers record sales when the vehicle is manufactured. The auto parts suppliers should see benefits about a quarter before the auto OEMs.

Toyota production year-to-date globally by month (thousand units)

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