Toyota expects annual operating profit to drop 80% as virus saps car sales

Toyota Motor Corp said on Tuesday it expects to post its lowest annual operating profit in nine years as the car maker grapples with the impact of the novel coronavirus, which has sapped global demand for cars.

Japan's biggest car maker said it expects operating profit of 500 billion yen (roughly R86.1bn) in the year to March 2021, down 80% from 2.44 trillion yen (about R419.4bn) in the year just ended. That would be Toyota's weakest profit since the 2011/12 financial year.

The global car industry is reeling from the pandemic as containment measures such as curbs on public movement have prompted drivers to hold off from vehicle purchases, forcing businesses to shutter production plants.

For the year to March, Toyota expects to sell 8.9 million vehicles globally, versus 10.46 million in the year just ended. The company expects vehicle sales to fall to a nine-year low.

Japanese car makers are bracing for a year of falling car sales as economists anticipate a slow and patchy recovery from the pandemic which may hold people back from spending, while social distancing practices may curb the desire to commute to work, dampening the need for new cars.

A global drop in demand for new vehicles since March has already slashed global sales at Japanese car makers, with annual sales at Toyota falling 1.4% from a year earlier.

Combined annual sales at Japanese car makers fell 7.3% to a four-year low of 26.5 million vehicles in the year ended March, showed Reuters calculations based on sales figures announced late last month by individual car makers.

Toyota and other car makers have begun to gradually resume operations at plants worldwide, but weak demand, procurement issues and social distancing measures are widely expected to limit output in the coming months.

As a result, some analysts see a cut in annual global vehicle sales by around a third, compared with an 11% fall in 2009/10, after the global financial crisis.

Toyota's ample cash reserves will likely help the company through the tough year. It has nevertheless sought a credit line totalling $9bn (roughly R166.1bn) from Sumitomo Mitsui Banking Corp and MUFG Bank Ltd as a buffer against rising fundraising costs due to the virus.