Toyota Plans to Fund R&D by Cutting Production Costs

To stay competitive in the next few years, automakers need to invest heavily in electric and autonomous technology. But considering how expensive those technologies are, bringing them to the market has the potential to significantly cut into profits. Toyota’s solution? Slash production costs.

The Detroit News reports that over the course of about six months, Toyota’s saved a full $875 million thanks to new production processes. As the paper points out, that works out to $3,300 saved every minute. Toyota then rolled those savings into its research and development budget, pushing it to a whopping $9.3 billion this year.

“We not only need to develop these leading technologies but also need to commercialize them,” Osamu Nagata, Toyota’s chief financial officer, told reporters. “In order to do that, we need to increase R&D expenses. This will be a cost burden so we need to speed up cost reduction.”

It also helps that the Japanese yen is relatively weak at the moment, allowing Toyota to make more money on cars it sells in foreign markets. That’s expected to add an extra $1.5 billion of income for the year.

Look for Toyota to invest at least part of the money it saves into a new factory it plans to build with Mazda by 2021. That factory is expected to cost about $1.6 billion and will be used to build Corollas in the U.S.

Source: The Detroit News

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