Toyota warns that raw material costs could cut profits by 20%

The Toyota 2023 Sequoia is on display at the April 13, 2022 New York Auto Show.

Scott Mlin | CNBC

Toyota Motor warned investors on Wednesday that an “unprecedented” increase in equipment and logistics costs could cut the company’s full-year profit by 20%.

The Japanese automaker says it expects equipment prices to double to 1.45 trillion yen, or more than .1 11.1 billion, in fiscal year beginning in April. Toyota says it plans to offset about 300 billion yen, or about $ 2.3 billion, in year-on-year growth through “cost-cutting efforts.”

The global automotive industry has been battling supply chain problems for almost a year and a half. A global shortage of semiconductor chips has sparsely shut down factories and significantly reduced car volume.

Toyota was able to navigate the supply deficit better than other automakers in the early days of the chip shortage, but added high inflation, increased costs and additional supply chain problems.

Covid-19 also continues to be a problem. Toyota said Tuesday it would suspend operations on 14 lines at eight domestic plants for six days in May due to a lockdown in China.

Toyota expects its operating profit to fall to 2.40 trillion yen ($ 19.7 billion) for the current fiscal year, down from 3 trillion yen ($ 22.9 billion) in the previous fiscal year ending in March. Net earnings fell 20% to 2.26 billion yen ($ 18.5 billion), despite expectations of record global retail sales at the time.

“This is unprecedented,” Toyota Chief Financial Officer Kenta Con said on Wednesday about the cost of raw materials.

Conn said the company is working internally and with its suppliers to reduce costs as much as possible to avoid “only price increases” for its vehicles for customers. He said this could include using less raw materials or switching to lower priced parts.

“We are There is a sense of crisis, and we understand that we must continue this effort, “said Koenig.

Toyota is the latest automaker to warn of rising costs. Tesla CEO Elon Musk has blamed inflation for pushing up the price of his electric car. General Motors and Ford Motors have also warned of significant cost increases this year.

Ford says it basically expects its price capability, combined with expected growth in production, to offset $ 4 billion in raw material headwinds. The automaker has previously forecast হে 1.5 billion to $ 2 billion for this headwind. This is a similar story to GM, which last month doubled its forecast product costs by 2022 to $ 5 billion.

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