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Japan’s car industry is forecasting a strong recovery this fiscal year after natural disasters disrupted production in 2011, with net profits at the country’s seven motor groups projected to more than double to Y1.78tn ($22bn).
In the annual financial reporting period that ended on Friday, Toyota, Nissan, Honda and other groups said they had overcome supply problems caused by Japan’s earthquake and tsunami last March, and flooding in Thailand later in the year.
The industry is expecting record production volumes for the year to March 2013. For the January to March quarter, Toyota’s output of 2.49m vehicles surpassed that of General Motors and Volkswagen, suggesting it could reclaim its title as the world’s largest automaker, after falling behind both groups last year.
The fastest recovery among Japan’s big carmakers has been achieved by Nissan, which reported robust earnings on Friday. For the fiscal year ending March 31, it was the country’s most profitable carmaker with net income of Y341bn, up 7 per cent on the previous year.
“It is an even more encouraging performance given the headwinds created by natural disasters, an overvalued yen and uncertain global economic conditions,” said Carlos Ghosn, chief executive.
Nissan’s strategy of aggressively shifting parts procurement and assembly operations outside Japan helped to insulate it from the effects of the earthquake and the strong Japanese currency – a problem for exporters. Its profits were 20 per cent higher than those at more domestically concentrated Toyota, even though the latter makes twice as many cars.
Toyota, which reported earnings on Wednesday, said its recovery was beginning to hit full stride, and forecast that net profits would nearly treble this year to Y760bn – the highest in five years.
Nissan is projecting a 17 per cent rise to Y400bn.
Japanese producers still face challenges such as the lingering strength of the yen and stiffer competition from foreign rivals such as GM and Hyundai.
One potential danger in Nissan’s forecasts is that it is counting on a slightly weaker yen than its main rivals are forecasting: Y82 to the dollar this year on average, compared with an assumption of Y80 at Toyota and Honda and an actual exchange rate of Y79.9 on Friday.
The forecasts highlight how far profit margins have fallen since the financial crisis. Japanese carmakers expect to produce a record 24m vehicles this year, yet in spite of the earnings rebound, net profits are projected to reach just 60 per cent of their pre-crisis peak.