Toyota and Nissan, the two largest Japanese automakers could make higher profits because of the recent decline in commodity price declines – with internally produced cars even cheaper to manufacture.
Commodities, such as steel and rubber, are seen by numerous analysts covering the industry, as one of the latest factors to consider when automakers factor in their declining prices into their global earnings figures to be tallied when the fiscal year ends in March. Declining material prices might buoy full-year net earnings at Toyota by at least half a billion dollars, according to Frank Schwope, an analyst at Norddeutsche Landesbank Girozentrale in Hanover, Germany. Additionally, Japan’s carmakers, which are scheduled to report third-quarter earnings starting with Honda on January 30, the lower commodity prices come on top of a weaker local currency that already lifted profits because it increased repatriated value of overseas earnings.
Toyota and Nissan initially estimated that raw material expenses would soar this year by 75 billion yen ($635 million) and 30 billion yen, respectively. But that could change as cold-rolled steel (which takes a big chunk of those costs) and rubber dropped 13 percent and 11 percent, respectively, over the past year, according to Bloomberg Intelligence calculations of average global prices. The plunge also comes amid higher demand from customers buying more cars in countries where the price of gasoline has spectacularly dropped – such as the United States. Data compiled by Bloomberg also forecasts that analysts have estimated average aggregate net income for Japan’s three largest automakers – Toyota, Nissan and Honda – to be 8% higher than internal goals.