Toyota set to ride robust demand, weak yen to bumper profit

TOKYO, Oct 31 (Reuters) – Toyota Motor (7203.T) is expected to report a surge in third quarter profit on Wednesday and lift its full-year outlook as the Japanese automaker benefits from both robust demand and a weaker yen currency.

Even as worries about the global economic outlook deepen, the world’s top-selling car manufacturer has been little fazed so far. Toyota sold 7.5 million cars including of its Lexus brand in the first nine months of the year, it said this week, an increase of almost 7% over the same period last year.

Toyota is also likely to continue to benefit from growing demand in the United States, where a six-week strike against Detroit’s Big Three that ended this week hurt U.S. rivals, said Seiji Sugiura, an analyst at Tokai Tokyo Research Institute.

“Toyota and other Japanese car makers are likely to see demand rise, so they still won’t need to offer incentives to sell cars. I think that’s going to mean more profitable sales,” Sugiura said.

Still, the outlook further down the road was less rosy, he said.

“By this time next year, U.S. economic conditions may be worsening and manufacturing or labour costs will go up, so sales will likely become challenging.”

Toyota is expected to report a near year-on-year doubling of its July-September operating profit to around 1.08 trillion yen ($7.19 billion), according to the average estimate in a poll of 10 analysts by LSEG.

The company is also expected to lift its operating profit forecast for the financial year to March 31, 2024, to about 4 trillion yen, according to the average estimate of 24 analysts, a 33% increase from its current forecast of 3 trillion yen.

Domestic production rebounded about 27% during the first nine months of the year versus that period in 2022, underscoring the extent to which the car maker has been able to shake off the impact of last year’s chip and part supply snags.

The yen has lost some 12% against the U.S. dollar this year, boosting the value of its overseas sales.

Toyota’s shares have surged nearly 45% this year, compared with the roughly 18% rise in the Nikkei (.N225) average.

Toyota and its Japanese peers face growing challenges from a shift to electric vehicles from gasoline-powered cars in key overseas markets and what suppliers say are extremely tough business conditions in China.

Japanese automakers are really struggling in the world’s largest auto market, said Shintaro Ito, chief administrative officer at Toyota group company Aisin (7259.T).

Production for the Chinese market as a whole has come in at lower levels than expected, with the country’s shift to battery-powered vehicles heavily benefiting China’s BYD (002594.SZ), Ito said.

There are also worries about soft demand for cars due to weak economic conditions in markets in Southeast Asia, notably Thailand, Indonesia and Vietnam, as well as the impact of higher U.S. interest rates on consumer spending.

($1 = 150.1200 yen)

Reporting by Daniel Leussink; Editing by David Dolan and Sonali Paul