Toyota Motor is stepping up cost reductions to shore up its money chest, as it looks to ramp up investment in new technologies, but cautioned a stronger yen would chip away at its operating profit and higher annual sales.
Toyota's plans to spend a record 1.08 trillion yen, or about $10 billion, on R&D this year comes at a time when carmakers worldwide are sharpening their focus on electrification and automation to stay competitive amid rising demand for vehicles powered by cleaner technologies.
As a buffer against currency moves and to ensure there are funds for R&D, Toyota "will prioritize sticking to its roots - the Toyota production system and cost cuts," President Akio Toyoda said, referring to a strategy to coordinate with suppliers to make cars when needed, minimizing inventories.
A recently introduced production system based on more standardized parts that can be used across different models will also continue to help deliver cost cuts, he added.
Cost reductions are expected to contribute around 130 billion yen to operating profit this year, after adding 165 billion yen to Toyota's earnings last year.
"We've become a leaner, trimmer company ... and in the past year we've developed our remaining fat into muscle, so that we're in a strong position to be more competitive," Toyoda said.
Japan's top carmaker posted a 20 percent jump in operating profit to 2.4 trillion yen for the year to March 2018, outpacing rivals Volkswagen AG <VOWGtp.DE> and Daimler AG <DAIGn.DE> for a fifth straight year to be the world's most profitable automaker.