Yes, as per Trefis estimates Toyota Motor Corporation (NYSE: TM) will see a top-line growth of 2.1% for FY 2020 (ended March 2020). Toyota’s automotive business is expected to contribute $258.3 billion to Toyota’s 2020 revenues – making up 92.9% of Honda’s $278 billion in expected revenues for the year. The automotive business is roughly 13x its Financial Services business in terms of revenues. The auto industry is likely to add $15.2 billion in total revenues between 2017 to 2020, with the Automotive business providing $12.5 billion (or 82%) of this total figure.
Below we discuss Toyota’s business model, followed by sections that review the company’s performance over recent years along with our forecast for 2020 and 2021. Our interactive dashboard analysis, ‘Toyota Revenues: How Does Toyota Make Money?’ details our expectations for Toyota’s revenue drivers, including pricing, volume sold, and competitive comparisons with Honda Motors and Tata Motors. Additionally, for a detailed analysis of the company please see Toyota’s valuation.
Toyota Motors Business Model:
What Does Toyota offer?
- Toyota Motor Corporation commenced operations in 1933 as the automobile division of Toyota Industries Corporation. As of March 31, 2019, Toyota operated through 608 consolidated subsidiaries (including variable interest entities) and 201 affiliated companies.
- Toyota primarily conducts business in the automotive industry, and sold just under 9 million vehicles in fiscal 2019 (on a consolidated basis).
Has 2 major Operating Segments:
- Automotive Division: Toyota produces and sells passenger vehicles, minivans and commercial vehicles such as trucks. Toyota Motor Corporation’s subsidiary Daihatsu produces and sells mini-vehicles and compact cars. Another subsidiary, Hino produces and sells commercial vehicles such as trucks and buses. Toyota also manufactures automotive parts, components, and accessories for its own use and for sale to others.
- Financial Services Division: Toyota’s financial services include loan programs and leasing programs for customers and dealers. Toyota believes that its ability to provide financing to its customers is an important value-added service. Toyota operates financial services companies in 37 countries and regions, which support its automotive operations globally.
What Are The Alternatives?
- Major competitors are companies like Daimler AG, Volkswagen, Ford, Tata Motors, and General Motors.
What Is The Basis of Competition?
- The principal factors that determine consumer vehicle preferences include overall vehicle design, price, quality, available options, safety, reliability, fuel economy, and functionality.
- Market leadership in individual countries in which they compete varies widely.
Revenue growth of about $10 billion over two years driven primarily by Automobile segment:
- Total Revenue has grown at a good pace from $262.8 billion in 2017 to $272.3 billion in 2019 primarily pushed by the Automobile segment. Trefis estimates revenues to grow further to around $283.8 billion by FY 2021.
- Toyota Motors Automotive Revenue has grown steadily over the past few years. It grew from $245.8 billion in FY 2017 to $253.2 billion in FY 2019. Trefis estimates Automotive Revenue to reach $258.3 billion and $263.5 for FY 2020 and FY 2021 respectively.
- Financial Services Revenue has grown steadily over the past few years. It grew from $17 billion in FY 2017 to $19.1 billion in FY 2019. Trefis estimates Financial Services Revenue to reach $19.7 billion and $20.3 billion for FY 2020 and FY 2021 respectively.
Further, the Trefis estimate for Toyota’s valuation indicates that the company’s stock is currently undervalued and our estimates for peer Honda’s valuation are also well above the current market price.
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