I should also mention another short-term strength, which is not only benefiting Toyota, but is benefiting almost all Japanese auto manufacturers. The weakened Yen is already benefiting Japanese giants like Sony Corporation (ADR) (NYSE:SNE), and Toyota is set to improve its profitability as the Yen continues to decline. The company increased its profit forecast by 10% to $9 billion for the year, which makes it a 5 year high. The increase in profit would also be an indicator showing Toyota’s recovery after a downfall due to the Japanese disaster in 2011. The weakened Yen doesn’t only present Toyota with improving marginal profitability, but also helps Toyota to lower costs and prices in order to be more competitive. Aside from that, this factor also helps Toyota increase its advertising expenditure and include better and new features in the upcoming cars while maintaining a the same price.
China is probably Toyota’s biggest weakness and the disputes between China and Japan is likely to affect all major Japanese manufacturers. China is a huge growing market for manufacturers like Toyota; however, after recent disputes, the company will have to lower its sales targets in China. Even though Toyota’s January sales showed an increase in the Chinese market for the first time in nearly a year, sales in China are likely to remain steady, if not drop, in the coming months.
The Japanese economy is another weakness for Toyota and we have seen how the 2011 natural disaster almost made Toyota collapse. Even though the company has seen impressive growth since the disaster, Japan’s current volatility is one of Toyota’s biggest risks. Toyota is heavily dependent on Japan’s economic conditions and if the country faces another natural disaster or economic downfall, Toyota could be affected severely.
Green technology is one of Toyota’s biggest opportunities going forward. Toyota is a leader in the green technology segment and is likely to maintain its position in the future. Green technology is a growing segment, as more and more people are adopting eco-friendly products. Once the green technology auto market reaches its potential size, Toyota will be set to capitalize in this relatively new segment.
Aside from that, Toyota’s upcoming models should also be monitored closely. Toyota already has a wide customer base with its popular lineups, including the Corolla. The company is expected to release new models soon, with its latest Corolla model for the U.S market. If the company manages to grab the attention of new and potential consumers with its upcoming models, then this can easily increase its global customer base.