Toyoda Gosei restructuring China operation, focusing on electrification

Tokyo – Toyoda Gosei (TG) has launched structural reforms across its Chinese operations after the region contributed significantly to a drop in annual sales and earnings.

For the  year ended 31 March, the Japanese group reported a 17% year-on-year revenue decline in China to Yen95 billion (€586 million), mainly due to lower production volume by automotive customers.

The region posted an operating loss of Yen7.2 billion, down from an operating income of Yen5 billion the previous fiscal year. TG cited lower sales and impairment losses as key factors.

As a result, TG said it had “embarked on structural reforms” and planned to implement its initiatives “with a sense of urgency.”

Overall, the Japanese parts supplier posted a 1.1% year-on-year decline in sales to just over Yen1,000 billion, while operating income fell 11.6% to Yen60 billion.

Toyoda Gosei attributed the weak performance to a slowdown in global automotive production, particularly in China.

In Japan sales decreased by 0.8% year-on-year to Yen440 billion yen, mainly due to lower customer production volume.

Operating income decreased by 28.2% to Yen11.4 billion yen due to lower sales and “other factors.”

In Americas, the group increase operating income by 30% year-on-year to Yen34 billion, on 1.7% higher sales of Yen404 billion.

Here, TG linked the improvement to the weaker yen and cost reductions, despite a market downturn and higher wages.

Revenue declined in Europe to Yen32.7 billion, down 5.2% compared to the year before, on lower automotive production by TG customers.

Operating profit in the region fell 3.1% to Yen2.6 billion on lower sales and despite cost cutting measures.

Meanwhile, India remained a bright spot, with revenue up 20.2% year-on-year at Yen42 billion and operating income rising by over 24% to Yen4.3 billion. TG said growth was driven by higher sales.

Looking ahead, the group forecasts a revenue of Yen1,000 billion for the current fiscal year and an operating income of Yen55 billion.

However, TG maintained that the business environment surrounding the automotive industry was undergoing “major and rapid changes”, starting with electrification.

“Electrification is expected to make global progress over the long term, although the pace is slower than initially expected,” said TG.

Accordingly, the group said its response to electrification is "the most crucial issue to achieve its 2030 goals."

In order to meet the expectations of key clients – Japanese car manufacturers – TG said it will strengthen its manufacturing capabilities.

The group will target areas such as “reliable quality and safety, advanced manufacturing technologies and environmental technologies” to improve manufacturing.

In addition, TG said it will expand sales to carmakers in each overseas region, remaining 'on the offensive' in two particularly important markets: India and the US.

TG went on to highlight what it described as “multiple urgent issues” that it needed to address as a unified group.

These, it said, include “unprecedented wage growth over the past two years, tariff risks brought by the new US administration, trends among Japanese car manufacturers in China, and trends among Chinese companies in Asia and ASEAN.”