Toyota Closes In on Record Profit as Rivals Face Expansion Pain

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Japan Earns Toyota
Itsuo Inouye/APLexus IS300h
By Yoko Kubota

TOKYO -- Toyota is closing in on a record profit set before the Lehman crisis after topping up its annual net profit forecast by nearly $2 billion and outperforming Japanese rivals as its expansion plans bear fruit.

The world's best-selling carmaker is racking up strong sales in a healthy U.S. market while keeping costs in check and taking a breather from building new facilities, in contrast to Nissan Motor and Honda Motor (HMC) which are grappling with heavy expansion costs.

Toyota Motor (TM), one of the most export-reliant Japanese carmakers, is also reaping the benefits of a weakening yen that has boosted its profit margins but acknowledged it will have to start spending more to maintain its advantage.

"Our basic stance of controlling fixed costs and improving gross profit will not change, but we do need aggressive investment in order to brush up on future technology," Managing Officer Takuo Sasaki told an earnings briefing Wednesday.

Toyota credited its conservative strategy as a key factor when it raised its net profit forecast by 190 billion yen to 1.67 trillion yen ($16.95 billion) for the year ending in March 2014, just short of its record 1.72 trillion yen from six years ago.

A Thomson Reuters I/B/E/S survey of 23 analysts gave an average forecast of 1.79 trillion yen. Toyota's annual operating profit rises by 40 billion yen for every one-yen rise in the value of the dollar.

Sweet Spot

Toyota, which went through a rapid expansion before booking huge losses in the year ended March 2009, now appears to be in the sweet spot of industry and currency market trends, and is reaping the rewards of it own investments in production.

But some analysts warned against complacency.

"There are clearly risks of Toyota starting to lag in growth pace to its peers," said Takaki Nakanishi, an auto industry analyst and CEO of Nakanishi Research Institute in Tokyo.

"If the decisions [on future expansion] are too slow, that may cause slower growth and that could make Toyota's earnings grow slower than its competitors."

Market participants also worried that the company might be too stingy with its cash.

"Toyota is representative of Japanese companies and even though it is generating so much profit its dividend yield of 2 percent is not enough," said BNP Paribas Securities chief Japan equity strategist Shun Maruyama.

%VIRTUAL-article-sponsoredlinks%For the July-September quarter, Toyota said net profit rose 70 percent to 438.4 billion yen, in line with the average estimate of 441.01 billion yen in a Thomson Reuters I/B/E/S survey of six analysts and outpacing Japan's second-biggest carmaker Nissan and third place Honda.

Last week, Nissan posted a meager 2 percent quarterly net profit growth while Honda booked a 46 percent rise.

Nissan is aiming to raise its global market share to 8 percent from last year's 6.2 percent and has been scrambling to build capacity worldwide. It is constructing eight new plants and expanding a factory in Russia.

Nissan plans capital expenditure equal to about 5 percent of revenue this financial year, compared with Toyota's 4 percent. On Wednesday, Toyota slightly raised its annual capital expenditure outlook by 2 percent to 940 billion yen.

To ease the burden of its expansion, Nissan and its partner Renault unveiled a potentially wide-ranging operating alliance this week with Mitsubishi Motors.

Nissan's quick but messy expansion has left it underperforming Toyota in the United States after running into product launch troubles and quality issues.

In July-September, Toyota's U.S. sales grew 12.2 percent year-on-year compared to Nissan's 9.6 percent rise. Industry-wide sales grew about 9 percent year-on-year during that period.

Toyota on Wednesday nudged up its North America sales forecast to 2.63 million vehicles from 2.61 million, helping to offset a drop in its Asia sales forecast to 1.64 million from 1.7 million.

Toyota's shares ended 0.5 percent higher, compared with a 0.8 percent rise for Tokyo's benchmark Nikkei average.

For the year to date, Toyota's shares are up nearly 60 percent, outpacing a 9 percent rise for Nissan, which was hit hard this week after cutting its full-year profit forecast Friday, and Honda's 25 percent rise.

Toyota sold the most cars among automakers worldwide in January-September, beating General Motors (GM) and Volkswagen.

Toyota Closes In on Record Profit as Rivals Face Expansion Pain

By Michael Zak | AOL Autos

A recent Interest.com study looked at the 25 largest metropolitan areas in the United States to see which median-income households in those respective areas can afford to purchase a new car, the average price of which was $30,550 in 2012, according to TrueCar. The study found that in only one city can residents actually afford a car with this sticker price -- Washington, D.C.

Households with an average income in Washington, D.C. can afford a payment of up to $628, which would allow for purchase of a $31,940 vehicle. The next closest city, San Francisco, can only afford $537 per month, equating to a $26,786.

While it's not news that Americans like to buy things that they can't afford, the data is a little surprising given how many great cars there are out there for well under $30,000. Solid hybrids, CUVs, sedans and sports cars can all be had for less than this.

We've racked our brains and come up with 5 of the best cars that are cheaper than the average car's purchase price. These are affordable, versatile, fun and fuel efficient. Of course, there are some stinkers in this price range, as well, so we've included 5 vehicles we think you should avoid.

Subaru BRZ

MSRP: $25,495 - $27,495
Invoice: $24,327 - $26,112
Fuel Economy: 22 mpg City, 30 mpg Highway

The Subaru BRZ proves that driving bliss doesn't have to cost a fortune. The rear-wheel drive sports coupe is one of the most engaging vehicles on the road today, with utterly superb dynamics and looks. The best part? You can have one for $25,495.

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Volkswagen Golf

MSRP: $18,095 - $25,200
Invoice: $17,371 - $24,192
Fuel Economy: 23 mpg City, 33 mpg Highway

Although the redesigned 2014 version of this handsome hatch will be on sale in the near future, the current generation is still worth buying. It's fuel efficient, fun and surprisingly versatile. Starting at less than $20,000, the Golf is also quite affordable.

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Toyota Prius v

MSRP: $26,650 - $30,295
Invoice: $24,809 - $28,202
Fuel Economy: 44 mpg City, 40 mpg Highway

The Toyota Pirus v is essentially a bigger version of the popular Prius hybrid. This hatchback acheives stellar fuel economy while allowing for transport of numerous people and all of their stuff. Starting at $26,650, you can have all the benefits of a versatile hybrid for an agreeable price.

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Mazda CX-5

MSRP: $20,995 - $28,595
Invoice: $20,396 - $27,771
Fuel Economy: 26 mpg City, 35 mpg Highway

The Mazda CX-5 is one of our favorite crossovers here at AOL Autos even when taking more expensive ones into account. Remarkably fun to drive, fuel efficient and starting at a low price, there's a lot to love about this agile utility vehicle.

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MSRP: $16,695 - $21,115
Invoice: $16,208 - $20,218
Fuel Economy: 28 mpg City, 38 mpg Highway

This small sedan continue to be the darling of both critics and consumers nationwide. Available with tons of standard features, great looks and sweet fuel economy, the Elantra is one of the best cars on the planet right now.

Research the Hyundai Elantra
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MSRP: $18,995 - $32,820
Invoice: $18,770 - $31,334
Fuel Economy: 21 mpg City, 29 mpg Highway

The 200 is a holdover from when Chrysler was owned by Daimler and then private equity-firm Cerberus Capital. It's not that this car is awful, especially since the new Chrysler, managed by Fiat, made a series of improvements. It's that the other cars in this category are so good, and much better designed and engineered.

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MSRP: $18,725 - $21,815
Invoice: $17,789 - $20,725
Fuel Economy: 23 mpg City, 31 mpg Highway

The Scion tC is intended to be a sporty coupe. The problem? It's not sporty. At all. In fact, the tC finds itself on the Consumer Reports list of the least fun cars to drive and we're inclined to agree with that assessment.

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MSRP: $18,995 - $30,795
Invoice: $18,800 - $29,276
Fuel Economy: 19 mpg City, 26 mpg Highway

Short on features and with pretty poor driving dynamics, the Dodge Journey is one you should skip if you're shopping for a sub-$30,000 crossover. We're looking forward to Dodge's next attempt.

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MSRP: $25,900 - $29,200
Invoice: $24,452 - $27,507
Fuel Economy: 24 mpg City, 35 mpg Highway

Don't be fooled by the badge. This is not really a luxury car. With uninspired driving dynamics and a lackluster interior, you should pass on the ILX even though its low sticker price seems very tempting.

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MSRP: $12,490 - $17,890
Invoice: $11,616 - $16,638
Fuel Economy: 34 mpg City, 38 mpg Highway

The idea of the smart fortwo is great. It's the execution that's the problem. The fortwo is loud, terrible to drive and really isn't all that fuel efficient, considering its size. There are way better options between $10,000 and $20,000.

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