Beleaguered Japanese car makers who went through turbulent times are now ready to rev up their assembly lines.
Toyota roared back to a hefty profit in the first quarter and said recently that it intended to build a record-breaking 9.76 million cars this year, leading a recovery by Japanese automakers after a year of natural disasters and a punishingly strong currency.
Though the strong yen continues to weigh on the bottom lines of Japanese exporters, many other things are going right for Japanese automakers. Supply chains that were severed are now up and running, and manufacturers like Toyota and Honda, racing to meet pent-up demand, are fast regaining lost ground in profitable markets like the United States. Japanese government incentives on fuel-efficient cars have revived markets at home.
Whether Japanese automakers can keep up the momentum after these tailwinds dissipate is another question, analysts said.
"They're at the peak of their momentum, but for quite transient reasons," said Takaki Nakanishi, an auto analyst at Bank of America Merrill Lynch in Tokyo. "It's not party time. Japanese automakers still face tough conditions and competition, and a slowdown is likely in the second-half."
For now, however, Japan's top three automakers - Toyota, Honda and Nissan - can breathe a sigh of relief after weathering the disasters of 2011, when an earthquake and tsunami wreaked havoc at car and parts factories in Japan, while widespread flooding in the manufacturing hub of Thailand paralysed production lines. Before that, the global financial crisis - and for Toyota, huge recalls - made it a difficult few years for Japan's carmakers.
Toyota said net profit for the April-to-June quarter rose to 290.3 billion yen ($3.71 billion) from 1.1 billion yen in the period a year earlier, after the number of vehicles it sold nearly doubled.
The brisk sales growth prompted the carmaker to raise its global sales target by 180,000 cars, to 9.76 million cars this year, which would be a 23 per cent increase from 7.95 million cars in 2011.
Including all its trucks and light vehicles, Toyota now expects to produce 10.05 million vehicles this year, which would make it the first automaker to break through the 10-million mark. The new targets could allow the company to win back its standing as the world's largest automaker; in the first six months of 2012, Toyota has been leading General Motors by 300,000 units.
Honda said recently that its quarterly profit rose as well, quadrupling to 131.7 billion yen. But Nissan said that its net profit had slipped 15 per cent, to 72.3 billion yen, from 85 billion yen a year earlier, partly because it was the least affected of Japan's Big Three in the disasters last year and had the least ground to gain back.
Reflecting uncertainties ahead, all three companies have modest forecasts for the year. Despite the strong first-quarter showing, Toyota said it would leave its annual profit forecast unchanged at 760 billion yen on 22 trillion yen in sales.
"The latest numbers are not necessarily reflective of our true strength," Takahiko Ijichi, senior managing officer, said in Tokyo. Continued turmoil in Europe, a slowdown in emerging markets like China and a still-strong yen clouded Toyota's outlook, he said. "There are various risks, so we feel it is necessary to remain cautious," Ijichi said.
Still, the robust earnings and global clout of Japan's automakers are providing some comfort to a country that has seen its consumer electronics companies slammed by foreign competition.
"At a time when other manufacturers are struggling, like Sharp, Toshiba and Sony, the automakers are giving markets relief," said Koichi Sugimoto, an analyst based in Tokyo for BNP Paribas.
In some ways, swift recovery in the tsunami's aftermath has proved the resilience of Japanese manufacturing, he said. Automakers here made concerted efforts to patch up supply lines, dispatching workers to crucial parts makers to help them start production ahead of schedule.
And after four years in the doldrums, the North American market is finally rebounding, helping to pick up some of the slack posed by a slowdown in some emerging markets. Honda, in particular, is set to release a revamped version of its popular Accord sedan in September, which should improve sales. Nissan too, introduced a new Altima sedan last month.
United States sales at all three automakers accelerated in July, with Honda posting an increase of 45 per cent from a year earlier. Sales rose 26 per cent at Toyota, and 16 per cent at Nissan.
Japanese automakers face an especially welcome opening in the United States market at a time when their rivals in South Korea, led by Hyundai, have no imminent new models. Hyundai made the largest gains in the United States as Japanese automakers retrenched last year.
"The Koreans have really narrowed the gap with Japanese automakers in the US market, but this year, there's a big chance for the Japanese," said Hiroshi Kuriu, a senior investment analyst at Manulife Asset Management. "There was nothing but bad luck for Japanese automakers over the past few years, but they're finally on an upswing."
The Japanese are also fighting to reassert their dominance in fuel-efficient cars, after a flurry of gas-electric hybrid and fully electric challengers from rivals like Ford and General Motors were introduced. Moreover, two factors have taken the momentum away from models like the Prius, Toyota's flagship hybrid car, experts say. Advances in the fuel efficiency of conventional gasoline engine cars, and relatively stable fuel prices make Prius's price premium harder to justify.
Ijichi of Toyota said the company had few options but to shore up profit by cutting costs further, selling a better mix of more expensive cars and in some cases, moving more production overseas.
Toyota roared back to a hefty profit in the first quarter and said recently that it intended to build a record-breaking 9.76 million cars this year, leading a recovery by Japanese automakers after a year of natural disasters and a punishingly strong currency.
Though the strong yen continues to weigh on the bottom lines of Japanese exporters, many other things are going right for Japanese automakers. Supply chains that were severed are now up and running, and manufacturers like Toyota and Honda, racing to meet pent-up demand, are fast regaining lost ground in profitable markets like the United States. Japanese government incentives on fuel-efficient cars have revived markets at home.
Whether Japanese automakers can keep up the momentum after these tailwinds dissipate is another question, analysts said.
"They're at the peak of their momentum, but for quite transient reasons," said Takaki Nakanishi, an auto analyst at Bank of America Merrill Lynch in Tokyo. "It's not party time. Japanese automakers still face tough conditions and competition, and a slowdown is likely in the second-half."
For now, however, Japan's top three automakers - Toyota, Honda and Nissan - can breathe a sigh of relief after weathering the disasters of 2011, when an earthquake and tsunami wreaked havoc at car and parts factories in Japan, while widespread flooding in the manufacturing hub of Thailand paralysed production lines. Before that, the global financial crisis - and for Toyota, huge recalls - made it a difficult few years for Japan's carmakers.
Toyota said net profit for the April-to-June quarter rose to 290.3 billion yen ($3.71 billion) from 1.1 billion yen in the period a year earlier, after the number of vehicles it sold nearly doubled.
The brisk sales growth prompted the carmaker to raise its global sales target by 180,000 cars, to 9.76 million cars this year, which would be a 23 per cent increase from 7.95 million cars in 2011.
Including all its trucks and light vehicles, Toyota now expects to produce 10.05 million vehicles this year, which would make it the first automaker to break through the 10-million mark. The new targets could allow the company to win back its standing as the world's largest automaker; in the first six months of 2012, Toyota has been leading General Motors by 300,000 units.
Honda said recently that its quarterly profit rose as well, quadrupling to 131.7 billion yen. But Nissan said that its net profit had slipped 15 per cent, to 72.3 billion yen, from 85 billion yen a year earlier, partly because it was the least affected of Japan's Big Three in the disasters last year and had the least ground to gain back.
Reflecting uncertainties ahead, all three companies have modest forecasts for the year. Despite the strong first-quarter showing, Toyota said it would leave its annual profit forecast unchanged at 760 billion yen on 22 trillion yen in sales.
"The latest numbers are not necessarily reflective of our true strength," Takahiko Ijichi, senior managing officer, said in Tokyo. Continued turmoil in Europe, a slowdown in emerging markets like China and a still-strong yen clouded Toyota's outlook, he said. "There are various risks, so we feel it is necessary to remain cautious," Ijichi said.
Still, the robust earnings and global clout of Japan's automakers are providing some comfort to a country that has seen its consumer electronics companies slammed by foreign competition.
"At a time when other manufacturers are struggling, like Sharp, Toshiba and Sony, the automakers are giving markets relief," said Koichi Sugimoto, an analyst based in Tokyo for BNP Paribas.
In some ways, swift recovery in the tsunami's aftermath has proved the resilience of Japanese manufacturing, he said. Automakers here made concerted efforts to patch up supply lines, dispatching workers to crucial parts makers to help them start production ahead of schedule.
And after four years in the doldrums, the North American market is finally rebounding, helping to pick up some of the slack posed by a slowdown in some emerging markets. Honda, in particular, is set to release a revamped version of its popular Accord sedan in September, which should improve sales. Nissan too, introduced a new Altima sedan last month.
United States sales at all three automakers accelerated in July, with Honda posting an increase of 45 per cent from a year earlier. Sales rose 26 per cent at Toyota, and 16 per cent at Nissan.
Japanese automakers face an especially welcome opening in the United States market at a time when their rivals in South Korea, led by Hyundai, have no imminent new models. Hyundai made the largest gains in the United States as Japanese automakers retrenched last year.
"The Koreans have really narrowed the gap with Japanese automakers in the US market, but this year, there's a big chance for the Japanese," said Hiroshi Kuriu, a senior investment analyst at Manulife Asset Management. "There was nothing but bad luck for Japanese automakers over the past few years, but they're finally on an upswing."
The Japanese are also fighting to reassert their dominance in fuel-efficient cars, after a flurry of gas-electric hybrid and fully electric challengers from rivals like Ford and General Motors were introduced. Moreover, two factors have taken the momentum away from models like the Prius, Toyota's flagship hybrid car, experts say. Advances in the fuel efficiency of conventional gasoline engine cars, and relatively stable fuel prices make Prius's price premium harder to justify.
Ijichi of Toyota said the company had few options but to shore up profit by cutting costs further, selling a better mix of more expensive cars and in some cases, moving more production overseas.