TOKYO — Toyota, Honda and Mazda all intend to keep stoking their heavy spending on costly next-generation technologies, even as the COVID-19 pandemic inflicts financial pain on them.
Toyota saw net income tumble 86 percent in the January-March quarter, and Honda plunged to a net loss. But both said cash reserves are fine and that they are keeping their focus on the long-run game of autonomous, electrified and connected vehicles.
“To survive, we will continue to invest in the next-generation technologies at all cost,” Honda CEO Takahiro Hachigo said last week while announcing his company’s loss. “We have no intention of scaling it down,” he said.
“I sense that there seems to be much talk about a V-shaped turnaround,” Toyoda said at his company’s earnings announcement, held virtually over Zoom. “By deciding to stop various things, an individual company can turn its results around.
Even Mazda, which booked a net loss of ¥20.3 billion ($188.3 million) in the January-March period on a 20 percent slide in global sales, plans to hold firm.
“We will not relent in our investment in development and facility for our future growth,” Akira Koga, Mazda senior managing executive officer said last week. “We will continue and step it up.”
The disciplined approach contrasts with surgical cutbacks seen elsewhere in the industry.
Ford Motor Co. postponed its autonomous vehicle commercial services until 2022, for example, and General Motors shuttered its Maven car-sharing service. Some suppliers also are reeling in projects as they shift to survival mode. And it remains to be seen what road other Japanese automakers will take. Nissan and Mitsubishi, for instance, have warned of full-year losses.
For the time being, Toyota and Honda can afford their long-term perspective thanks to relatively solid finances, despite the sudden hit from falling sales and suspended production.
Toyota is better prepared for a downturn today than it was during the 2009 financial crisis. At that time, it had about $27.8 billion in cash reserves. Today, thanks to Toyoda’s aggressive cost control and contingency planning, it has about $74.2 billion.
Honda said it faces no cash crunch at the moment and has sufficient credit lines as a backup.
Toyota CFO Kenta Kon said the company will delay some new-model plans because of the pandemic slowdown, but he said the overall impact would be insignificant.
Indeed, Toyoda said the company would stay steady with big R&D investments, such as the Woven City “town of tomorrow” it is building in the foothills of Mount Fuji.
Despite falling sales in the current fiscal year, Toyota will keep R&D spending stable at ¥1.1 trillion ($10.2 billion). As a percentage of revenue, R&D outlays will increase to 4.6 percent, from 3.7 percent.
“Recently we have planted the seeds of a new Toyota,” Toyoda said. “And for this kind of new project, we will continue pushing the accelerator pedal.”
Honda didn’t give an outlook for its R&D outlays in the current fiscal year. But it spends an even bigger chunk of its revenues on R&D than Toyota, despite being smaller. In the fiscal year that ended March 31, it channeled 5.5 percent of its top line into future technologies.
Mazda, which sold only 1.42 million vehicles in the last fiscal year, compared with Toyota’s 10.46 million, spent ¥135.0 billion ($1.25 billion) on R&D, or 3.9 percent of its revenue.
Both Toyota and Honda seemed upbeat about recovery in the U.S., a top market for each.
Honda executives warned that a second or third wave of coronavirus outbreaks, which some health officials predict will arrive this fall, pose a threat to stable market recovery. But Honda began a gradual restart of its U.S. plants this month, and showrooms are opening.
“Dealers have started operations gradually,” Hachigo said. “On a national level, it may be the summer, at the earliest, when sales activities return to normal.”