To combat a strong Yen,
) is looking to raise prices on many of its models and shift
production abroad. Currently, Toyota produces half its vehicles in
Japan, so a strong Yen hurts the profitability of the company.
Although the magnitude of price increases has not yet been decided,
price changes will only pertain to competitive models in which
Toyota possesses relatively stronger pricing power. Toyota's
stock is up 20% this year as the automaker recovers from its lows
Earlier in the year, the automaker announced its decision to
ramp up output in its U.S. and Canadian plants and has poured in
more than $1.6 billion since. Recently, Toyota also announced
its decision to invest around $160 million in India mainly to
expand the production of
in the country. The investment will see the capacity of its South
Indian plant rising from 210,000 units currently to 310,000 units
by 2013. Similarly, in Thailand, Toyota looks to boost its
production in the country to 1.2 million units as the country aims
to become one of the top 10 auto producing nations.
See full analysis for Toyota Motors
It has been a double whammy for Japanese automakers as the Yen
has risen 45% against the U.S. Dollar in the past five years while
the South Korean Won has depreciated 17% over the same period; thus
giving automakers such as Hyundai and Kia a pricing edge. South
Korean automakers have worked hard to change the public perception
by improving quality, brand and consumer satisfaction and the
gap between the Japanese and Korean car makers, in terms of quality
of vehicles, has definitely narrowed. As a result, Japanese
automakers commanding a premium for their cars could force
consumers to switch to Korean alternatives.
Toyota isn't the only Japanese automaker looking to shift
) has already pledged to produce more cars in North America in
order to reduce its dependency on Japanese exports. The
automaker is expanding the production line of its plants in the
U.S. and Canada while building a new plant in Mexico. By 2015,
96% of the cars sold by Honda in North America will be manufactured
locally, up from 85% currently.
We currently have a $90 price estimate for Toyota's stock,
which is about 10% higher than the current market price.
How a Company's Products Impact its Stock Price at