Press Release

DBRS Morningstar Changes Trend on Toyota Motor Corporation to Stable from Negative, Confirms at AA (low)

Autos & Auto Suppliers
September 23, 2021

DBRS Limited (DBRS Morningstar) changed the trends on the Issuer Ratings of Toyota Motor Corporation (Toyota or the Company), Toyota Financial Services Corporation, and Toyota Credit Canada Inc. (TCCI) to Stable from Negative and confirmed those ratings at AA (low). Additionally, DBRS Morningstar changed the trends on TCCI’s Medium-Term Notes and Commercial Paper ratings to Stable from Negative and confirmed these ratings at AA (low) and R-1 (middle), respectively. The trend changes reflect ongoing solid financial performance of the Company despite meaningful challenges associated with the progression of Coronavirus Disease (COVID-19) last year as Toyota benefitted from a strong industry recovery in the latter half of 2020. Despite prevailing near-term headwinds that include the global semiconductor shortage, the Company’s financial risk assessment (FRA) is estimated to remain commensurate with the currently assigned ratings, which remain supported by Toyota’s solid business risk assessment (BRA) as one of the world’s leading automotive original equipment manufacturers (OEMs) with a strong presence in both mainstream and luxury automotive segments as well as a dominant position in its native Japanese market.

While Toyota’s F2021 (ended March 31, 2021) results softened year over year (YOY) because of the challenges associated with the coronavirus pandemic, Automotive earnings remained at sound levels as the segment generated an operating margin of 6.5% (as calculated by DBRS Morningstar) with negative volume and foreign exchange effects significantly offset by ongoing cost reduction efforts. Additionally, Automotive profits were supplemented by earnings growth in China (accounted for by the equity method) and strong performance of the Financial Services business that significantly reflected favourable residual value performance in line with strong used car prices stemming from ongoing low industry inventory levels. In Q1 F2022, Automotive earnings trended sharply higher compared with Q1 F2021 given higher volumes and product mix, among other factors, with Toyota thus far being somewhat less affected by the global semiconductor shortage relative to other OEMs. For F2022, despite headwinds in the form of the ongoing semiconductor shortage and increasing raw material costs, the Company is projecting consolidated earnings to moderately strengthen YOY.

Going forward, DBRS Morningstar notes that the automotive industry faces meaningful cost headwinds over the next several years in line with the increasing electrification of vehicles (as a function of emission regulations being tightened globally) amid ongoing investments in new mobility business initiatives. Toyota remains well positioned to withstand these challenges given its (1) substantial liquidity position, with total liquid assets as of March 31, 2021, amounting to JPY 11.6 trillion (roughly USD 109.4 billion equivalent); (2) strong track record in efficiency gains; and (3) established presence in electrified models.

Consistent with the assigned Stable trend, the ratings are expected to remain constant over the near to medium term. DBRS Morningstar notes that Toyota’s FRA, including its inordinately strong liquidity position, provide a cushion against unexpected challenges, rendering a downgrade unlikely. Conversely, an upgrade is not anticipated over a similar time horizon in line with the aforementioned cost headwinds facing the industry.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at

All figures are in Japanese yen unless otherwise noted.

The principal methodologies are Rating Companies in the Automotive Manufacturing and Supplier Industries (October 22, 2020;, DBRS Morningstar Criteria: Guarantees and Other Forms of Support (May 31, 2021;, and DBRS Morningstar Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (March 9, 2021;, which can be found on under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021;

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit or contact us at [email protected].

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