Toyota Motor said on Tuesday it expects profit to decline by 80% to its lowest in nine years, as Japan’s biggest automaker attempts to recover with the impact of the coronavirus which has led a significant decline in global demand for vehicles until now.
The expected damage to Toyota’s bottom line shows upcoming experiences of automakers to recover from the impact of the coronavirus as they gradually resume plants after curbs on public movement which prevented workers in many countries from commuting.
The industry expects limited output because of fractured supply chains and social distancing measures at factories, together with weak demand as job losses and concern about an economic downturn weigh on consumer spending on significant purchases like cars.
Toyota expects to take a massive 1.5 trillion yen ($13.95 billion) hit from a fall in global vehicle sales in 2020 mainly because of the coronavirus. Yet the automaker still expects to make an operating profit of 500 billion yen ($4.66 billion) in the year to March.
“The coronavirus has dealt us a bigger shock than the 2008 global financial crisis,” said Akio Toyoda, the Toyota President Akio Toyoda in a media briefing which was streamed live.
“We anticipate a huge decline in sales volumes, but regardless of that we are expecting to remain in the black. We hope to become a leader of the country’s economic recovery.”
Toyota observes its operating profit in free fall from 2.44 trillion yen in the year just ended, to its lowest profit since the 2011-12 financial year.
The automaker forecast worldwide sales of 8.9 million vehicles – a nine-year low – against 10.46 million in the year just ended. It expects sales to revive to 2019 levels next year.
Toyota’s outlook came as competitors such as Honda Motor and General Motors have refrained from releasing forecasts, citing uncertainty about the coronavirus crisis.
On Tuesday, Honda released its lowest annual profit in four years, following a 28% decline in fourth-quarter vehicle sales plunged the automaker into an operating loss of 5.2 billion yen, its first quarterly loss after the March 2016 quarter.
Toyota expects sales to remain low until December before returning to 2019 levels sometime in 2021.