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Toyota Looking To Reclaim Green Image As Profits Fall

The company is facing a 35% drop in profits thanks to a strong yen

12May

When you think of the most valuable brands in the world, you’d be forgiven for omitting Toyota from your top 10. While the likes of Apple, Google, Facebook, McDonald’s and Coca Cola spring to mind immediately, the Japanese car giant is perhaps less of an obvious influence on the life of the average consumer. But Toyota’s brand is synonymous with quality, affordability and reliability - a well cultivated image for a car manufacturer - and has a considerably higher brand value than that of its closest competitor, BMW.

Five years of steady profits are set to come to an end for the fiscal year through March 2017, though. Thanks to a stronger yen and a slowdown in emerging markets and in China, Toyota expects a 35% drop in net profit, predicting ¥1.5tn ($13.8bn). The projection is way below analyst forecasts of ¥2.2tn, while revenue is also expected to decline by 6.7%. The just-finished fiscal year had an exchange rate of one dollar to ¥120, but this is expected to dip to ¥105, the strongest yen since Shinzo Abe became prime minister in 2012. Supply chain disruptions caused by earthquakes in southern Japan last month have compounded issues for the car giant. A rise in vehicle sales in the North American market has offset declines elsewhere, somewhat mitigating the loss, but Toyota faced a number of issues in a relatively difficult 2015.

Even so, data published in January confirmed that Toyota retained its crown as the world’s top-selling carmaker. For the fourth straight year, Toyota has outsold both Volkswagen and General Motors with 10.15 million units sold across 2015. Sales of the Prius - perhaps Toyota’s best-known model - dipped in 2015, though, hitting just 184,794 in the US. The hybrid suffered thanks to not just a drop in fuel prices but a growing number of competitors, and the 5.4 million Priuses sold worldwide since 1997 may start to waver in popularity as the likes of Tesla take up the mantle.

To counter Prius’ apparent decline, Toyota is looking to muscle back the green image it so successfully cultivated with its hybrid, from Elon Musk’s Tesla. While the California-based company has been making headlines with its electric Model S and upcoming Model 3, Toyota has quietly been working on something perhaps far more revolutionary. The Mirai is powered by electricity, but generates that electricity on demand, by reacting stored hydrogen with oxygen from the air in a fuel-cell stack. The Mirai can be refuelled in around five minutes, where a standard electric will take hours, and its range is also greatly improved on that of its competition; it’s 312 miles is comparable to that of a gasoline-powered car, where even Tesla’s much-lauded Model S 85D comes in at just 240 miles.

Crucially, the Mirai emits only water, and once the currently extremely limited number of hydrogen filling stations (standing at a paltry 16 in the US) expands, Toyota could muscle its way back into the green automobile spotlight. The sixth most-valuable brand in the world has in some ways lost its niche to the likes of Tesla, one that it will be keen to lay claim to in the face of falling profits. ‘When you talk about electric cars, most people jump to Tesla. When you say autonomous, everybody talks about Google,’ said Jez Frampton, global chief executive of Interbrand. ‘The car industry has all the capability to beat these upstarts. And yet they seem to have grabbed people’s imagination. That lays a significant challenge at Toyota’s doorstep.’ Toyota’s wildly valuable brand may be too rooted elsewhere to muscle the green image away from the less constrained Tesla, but Mirai could hold the key. Elon Musk has built Tesla’s entire brand on the merits of cleaner roads but, if hydrogen power proves to be a more viable alternative as fuel, Toyota’s financial power could quickly bring it out of obscurity and into prevalence.

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