Toyota Motor Corporation
) is the world's largest automaker by sales and is
headquartered in Japan. Toyota has been majorly affected by the
devastating Japan earthquake and tsunami in March, and continues to
face significant risks to its global operations. Here we take a
look at the possible effects of this natural disaster on Toyota's
stock value. Toyota sells its vehicles under three main brands
(Toyota, Lexus and Scion) and competes globally with automakers
like BMW (GR:BMW),
(ETR:DAI), Audi (
), Ford (
), Honda (
) and others.
We have a price estimate of $80.29 for Toyota stock, roughly 5%
ahead of market price.
Toyota Facing Significant Risks Arising From Natural
Toyota hasn't been immune to the after-effects of the natural
disaster that hit Japan in March. Toyota and its affiliates have
three factories in the Tohoku region, a center for auto making in
Japan, that suffered greatly because of the tsunami. According to
Japan's Cabinet Office figures, the Tohoku region accounts for
about 8% of the country's gross domestic product. Following the
massive earthquake and ensuing tsunami last month, Toyota
subsidiary plants that produce parts and vehicles had to stop
production. The plants affected included:
- Toyota Motor Hokkaido Plant
- Toyota Motor Tohoku Plant
- Central Motor Corporation Miyagi Plant, which also produces
the Yaris model.
- Kanto Auto Works Iwate Plant, which also produces the Scion
xB and Scion xD.
Toyota re-started production at two plants that make three
hybrid models on Monday April 4, but almost two thirds of its
suppliers from northeastern Japan are still not functioning. Toyota
hopes to start producing more models for the Japanese market by
mid-April, depending upon the recovery of parts and materials
Disruption in Supply Chain and Damages to Port
Toyota produces more than 50% of its vehicles in Japan. In
fiscal year 2009, ended March 31 2010, Toyota produced more than
60% of its vehicles in Japan, as Japan accounted for a little over
25% of its global vehicle sales.
Almost two thirds of Toyota's suppliers from northeastern Japan
have not yet recovered from the disaster, and this will put
pressure on Toyota's manufacturing capacity. The damage to
Japanese sea ports could hurt, in the short-term, Toyota's vehicle
exports as well as the supply of Japanese automotive parts to
Toyota's other international automobile manufacturing
The short-term effects of this natural disaster could
potentially knock 20% off of our present growth estimates for
Toyota's international vehicle market share through 2013. Also,
Toyota's vehicle market share in North America could potentially
decline by about 0.5% this year, and growth projections could slow
down to 80% of our current projection over 2012-13.
Scion Sales in North America Could Suffer Due to Damaged
Damage to Kanto Auto Works Iwate Plant, which also produces the
Scion xB and Scion xD, could hurt the sales of Scion vehicles in
the short term.
Given the situation, unit sales of Scion vehicles could deviate
from our forecasted base case path. The disaster could spur a
potential 4% decrease in unit sales this year, after which we might
see a 5% recovery next year followed by sales continuing on our
base case projected growth track.
Potential 6% Downside to our $80.29 Price Estimate for
Given the scenarios presented above, the effects of the
earthquake and tsunami that hit Japan in March could present 6%
downside to our base case price estimate of $80.29 for Toyota
stock, pushing our number to $75.40.
The effects could bump Toyota from its position atop the
bestsellers list, in terms of vehicles sold globally, and give the
crown to GM, which marginally fell behind Toyota in 2010. You
can examine a variety of scenarios for Toyota's outlook by dragging
the trend lines in the interactive charts above.
See our full analysis and $80.29 price estimate for