Toyota Boosts Profit Outlook, Cautions on Coronavirus Impact in China

Toyota will likely shift 10.7 million cars over its 2020 financial year, more than 20 times that of Tesla, but noted its concern for supply chains in China amid the ongoing coronavirus outbreak.
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Toyota Motor Corp.  (TM) - Get Report boosted its full-year profit outlook Thursday but noted that the global car sales, and particularly those in China, could be hard hit from the knock-on impact of the deadly coronavirus.

Toyota posted a 3.2% slide in third quarter profits Thursday, to 654.4 billion yen ($5.95 billion), but said a weakening yen would support sales and margins over the final months of its financial year, which ends in April, and lifted its 2019/2020 forecast by 4.2% to 2.5 trillion yen.

Toyota said it expects global vehicle sales of around 10.7 million units, with North American sales improving to 2.71 million vehicles, a modest bump higher from its previous forecast, based on an average value of 108 yen to the U.S. dollar.

Chief operating officer Masayoshi Shirayanagi also told reporters following the results that the carmaker would look "very closely at inventories of components which are made in China and used in other countries, including Japan, and at the possibility of alternative production" as the coronoavirus spread continues to shutter factories and facilities in the central industrial province of Huebi and the surrounding region.

Toyota shares rose 2.58% in Tokyo trading Thursday following the third quarter results, a move that extends the value of the world's biggest carmaker over teh past six months by 17.8%.

Domestic rival Honda Motor Co., meanwhile, might keep plants located in Whuan, the epicenter of the outbreak, closed beyond a prior scheduled of February 13, according to reports from the Nikkei Business Daily. Last week, Hyuandi Motor Co. suspended production in South Korea owing to knock-on effects from supply chains in China.

"My strong instinct is to want to tell you what the impact of this virus may be on our business and our guidance for this year. However, it's simply too early," Ford Motor Co.  (F) - Get Report CEO Jim Hackett told investors after the company's disappointing fourth quarter earnings that sent shares into a 9.5% tailspin yesterday. 

"China is only now starting to come back from an extended New Year holiday. And many companies including Ford are currently hoping to resume large parts of their industrial operations next week," he added. "And that is most experts are already saying and we agree that it will take weeks to begin to understand the implications of the outbreak."

Tesla Inc.  (TSLA) - Get Report shares were also pressured from China concerns yesterday, falling more than 17% -- the most since 2013 -- after company vice president Tao Lin said deliveries from its newly-opened Shanghai plant would be delayed until at least February 10.

General Motors Co.  (GM) - Get Report said it expects a "meaningfully lower equity income in China in the first quarter of 2020" as a result of the coronavirus outbreak, which has killed 563 people and infected at least 28,000 others, 

"The coronavirus situation right now is very concerning. It's a very fluid situation, with updates that we're getting on a daily basis," said GM China president Matt Tsien. "

In terms of the impact on sales, there will be I believe a near-term impact on the overall industry," he told investors on a conference call Wednesday following the carmaker's stronger-than-expected fourth quarter earnings. "Fundamentally, dealerships have been closed for the Lunar New Year. In some regions, they're slowly ramping back up. In many other regions, they still remain closed. So we expect that there will be an impact on volume in the near term."