Toyota production: July – September to rise

by SR on June 27, 2012

Toyota production in Japan, cumulative (million units)

The Chubu Keizai newspaper (the “Chukei”) has reported that Toyota’s rolling 3-month domestic production forecast for the July to September 2012 period calls for output to remain at a high 15,000 units per day. The naiji rolling forecast is disseminated to Toyota’s suppliers so that they have some idea of how to prepare their own production. Toyota’s “just in time” manufacturing processes operate on the idea that parts and components are delivered to manufacturing facilities only when required, but that doesn’t obviate the need for longer term planning and the naiji is a key element of this process. (Incidentally, the Chukei is in effect the local newspaper of Toyota’s home Aichi prefecture and its information is usually accurate.)

The rolling 3-month forecast can and does diverge from plan on a monthly basis and is best considered in blocks of 3 months. For example, the naiji for February to April 2012 was forecast to be 15.5k units per day. Looking at working days, it seems that Toyota actually ground out 16.5k/day in February and March and 13.8k/day in April 2012, but for the three months as a whole output came to 987k over 63 working days. That’s an average of 15.7k/day for Toyota production, close to the original forecast.

I count 60 working days in the July to September quarter, so an average output of 15k/day suggests domestic Toyota production of 900k units, an increase of 9.2% YoY. That would be an increase over the April to June quarter of between 3 and 4%, I estimate. In addition to firm export demand for Toyota product, the domestic market is ticking away nicely due to new models like the Aqua hybrid. Toyota will launch a full model change for the Porte/Spade compact in late July 2012 and while this is not a significant seller on a global basis, it should help support demand within Japan. Globally, Toyota has been building momentum and the maintenance of that momentum is a key part of our investment thesis for the company and for its parts suppliers.

As the chart at the top of the page shows, the red line showing cumulative production in Japan from January to April 2012 (the latest figure we have) is not only ahead of 2011 (the blue line) but is ahead of the strong 2010 (the purple line) and nearly back to 2008 levels (the green line). Toyota’s production for May 2012 in Japan should be announced this week. I expect a decline of 0-5% month-on-month.

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