Coronavirus News Asia

Rough ride ahead for Toyota, Honda and Japan Inc


Where General Motors goes, America goes. Likewise, where Toyota and Honda go, Japan goes. If the latest signals from these two Japan Inc icons are any guide, Asia’s No 2 economy is veering off the road into an even deeper ditch than anticipated.

The 86% plunge in operating profit that Toyota, Japan’s biggest automaker, reported in the January-March quarter dramatizes the stakes as the coronavirus fallout intensifies. What’s more, the 80% profit plunge Toyota expects in the year to March 2021 is the worst in nine years.

But even that could be optimistic as global demand seizes up and Japan skids into recession.

As President Akio Toyoda puts it, Japan Inc’s most important blue-chip faces its biggest stumble since the global financial crisis. But that 2007-2008 crisis was only a debt-crash-driven event. The current disaster features that – plus consumers everywhere being too afraid to visit dealerships even if they have cash.

The second blow in the one-two punch was Honda’s 13% profit drop in the January-March period – and a 15% sales decline. So uncertain is today’s terrain that Honda declined to provide full fiscal-year forecasts.

Toyota’s initial hit is bigger because it’s far more exposed to the US and Chinese markets, where production shutdowns and declines in demand have been most acute. And Toyota, with a US$172 billion market capitalization, dwarves Honda’s $41 billion market cap.

Meanwhile Nissan, still reeling from the late 2019 arrest of former Chairman Carlos Ghosn, will report results later this month.

Across the board

Investors had been braced for a sharp downshift as the coronavirus skewers Asia’s 2020. The damage is proving to be just as spectacular in sectors typically viewed as less vulnerable to business-cycle shifts, from cosmetics to beer.


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