TOKYO: For all the turmoil over Toyota’s wave of recalls, the automaker may face a bigger problem: the surging yen. With the yen at 15-year highs against the dollar, at a nine-year peak versus the euro and still near recent highs against the South Korean won, Toyota, the world’s largest automaker, is finding that its cars have become too expensive to compete effectively in the increasingly cut-throat global auto market. That has allowed its foreign rivals to make big inroads around the world. Volkswagen of Germany, Hyundai of South Korea and the Detroit automakers all are benefiting from their relatively weaker currencies.
Hyundai is quickly expanding its share in major markets, including China and the United States, using record profits to offer cash rebates, low-interest financing and other aggressive incentives that Toyota is struggling to match.
Volkswagen continues to dominate in Europe and across much of the Asia-Pacific region; its chief executive, Martin Winterkorn, has said the company aims to be the world’s largest automaker in sales by 2018, up from third place today, behind No.2 General Motors. Analysts say the yen, which started to soar as a refuge currency in late 2008 in response to the global financial crisis, has highlighted a flaw in Toyota’s global production setup. The company still depends too heavily on factories and suppliers in its high-cost homeland, they say. While Toyota is acting to improve the ratio, about half its cars are still assembled in Japan, and many of them are shipped overseas on huge tankers.
“Before the yen’s surge, Toyota got by with exporting lots of cars even though it was aware that posed a big currency risk,” said Takashi Akiyama, vice president at the Tokyo-based SC-ABeam Automotive Consulting. “They held out for as long as they could, but now they’re seeing the consequences of stalling.”
Other big Japanese exporters like Honda, Nissan, Sony and Canon feel the yen’s burden, too. Japan’s export growth slowed for the fifth consecutive month in July, weighed down by the strong yen. But because those other companies have moved more of their production overseas in recent years, they suffer much less from currency arbitrage.
