Toyota to Avoid Profits Nightmare Caused by Chip Crisis


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Investors are expected to see two scenarios play out among Japanese automakers this week as the country’s largest automakers report financial results.

On the one hand, Toyota Motor Corp., which, thanks to its advance supply chain planning, has weathered the pandemic relatively well. On the other hand, everyone, mired in a quagmire of factory closures due to the global chip shortage.

“There will likely be winners and losers, depending on their inventories,” said Nakanishi Research InstituteIt’s Takaki Nakanishi. This bifurcation can already be seen in the United States between General Motors Co. and Ford Motor Co., which sees a chip shortage cost of $ 2.5 billion, he said. GM has meanwhile left its annual outlook unchanged earlier this month.

Like all automakers, Japanese companies have been hit by reduced consumer demand due to Covid, although car sales have rebounded over the year. What really hurts is the widespread semiconductor shortage caused by an increase in demand for chips used in electronic devices such as laptops, mobile phones and game consoles.

As the consumer devices sector absorbed inventory, many automakers found themselves empty-handed, sparking wave after wave of production line shutdowns. A fire at the Renesas Electronics Corp. automotive chip plant. in Japan and winter storms in Texas only made matters worse.

Toyota, which owns around 3% of Renesas and is one of the company’s biggest customers, has even sent workers to its factory in Naka in eastern Japan to try and keep its own supply chain alive. life. “Renesas owes a lot to Toyota” because Toyota backed the chipmaker after the 2011 earthquake in Japan and the recent fire, said Takeshi Miyao, analyst at Carnorama. “In a way, he has an obligation.”

But for smaller, less powerful automakers, procuring chips is much more difficult. As car manufacturers scramble, the power dynamic between them and the chipmakers has been reversed. Although global vehicle sales are expected to increase by around 10% in 2021, they will remain well below pre-pandemic levels due to “supply chain disruptions on the supply side and many consumers. faced with difficult financial circumstances resulting from Covid-19. pandemic on the demand side, ”according to Fitch Solutions.

Investors should therefore not expect much optimism from this latest round of financial results, but rather a series of cautious forecasts that mostly talk about the supply chain and ongoing virus risks, Tatsuo said. Yoshida, analyst at Bloomberg Intelligence.

Here’s what we might see from some of the biggest names.

Toyota

  • Investors will ensure Toyota projects operating income for the next fiscal year ending March 2022 above pre-pandemic levels, or stick to a more cautious projection.
  • While the situation is likely to get more murky in the summer, so far Toyota has emerged largely unharmed of the shortage of chips reflecting its competitors. Analysts forecast, on average, operating profit of 2.7 trillion yen ($ 25 billion) for the fiscal year through March 2022
  • For the year ended March, investors will consider whether Toyota, benefit to recover global demand for cars, is able to beat its brilliant operating profit target published in February
  • Previously Toyota raised its operating profit outlook of over 50% to 2 trillion yen for the period; analysts are projecting, on average, 2.1 trillion yen. Toyota reports May 12

Nissan

  • Japan’s other major automaker, Nissan Motor Co., will be watched for continued cost reduction and recover sales this calendar year mean operating profit for the most recent quarter and operating loss for the year that is at least better than that of the business previous forecast for a deficit of 205 billion yen
  • The number of cars Nissan was able to produce in the 12 months through March will also determine how its operations are affected by the global chip shortage; it previously expected to sell around 4.02 million vehicles in fiscal 2020, 150,000 units less than previous forecast
  • In addition, investors will be careful about whether Nissan expects operating profit for the fiscal year ending March 2022; in fiscal year 2019, before the pandemic hits, it posted an operating loss of 40 billion yen
  • Nissan announces May 11

Honda

  • While Honda Motor Co. will likely bump its fourth-quarter operating profit forecast, it will likely have a fairly conservative outlook for fiscal 2022 due to coronavirus and supply chain risks, Yoshida said.
  • Market expectations are for operating profit of 761 billion yen for the fiscal year to March 2022
  • Honda, which reports May 14 boosted forecast in February, saying it is now aiming for an operating profit of 520 billion yen for the current fiscal year, with good sales tracking despite the chip shortage
  • Chip issues, however, led the Tokyo-based group to shut down three factories in Japan for about five to six days this month. Delivery of its new Vezel SUV – especially Vezel’s luxury model – could be delayed by several months, a sign that the chip crisis is still severe
  • Earlier this week, Honda announced it would close factories in Thailand and India in May, both due to the chip crisis and Covid.
  • The market will monitor any concrete plans around CEO Toshihiro Mibe’s ambitious goal of selling 100% electric vehicles by 2040, especially given Honda’s struggles to improve profitability in its four-wheeled vehicle segment.

Subaru

  • The little Subaru Corp. was hit hard by the crackle of the chips. The automaker halted production in the United States and Japan, cutting production by 25,000 units in total
  • Last year, Subaru’s profits were supported by strong demand in the United States, where it generates about 72% of its revenue. In February, Subaru reduced its sales target from 43,000 units to 868,000
  • It now forecasts operating profit of 100 billion yen for the fiscal year through March, lower than the 124 billion yen average predicted by analysts. His results arrive on May 11

Mitsubishi Engines

  • Mitsubishi Motors Corp. didn’t do too well either, in April trimming production up to 16,000 cars worldwide this month, nearly a fifth of total production.
  • To weather the crisis, Mitsubishi, which is also announcing May 11, is looking to Southeast Asia, in an attempt to strengthen the Nissan-Renault-Mitsubishi alliance as well.
  • However, sales in some of these countries, like the Philippines and Thailand, weaken as Covid infections rage.

–By Shiho Takezawa and River Davis

–With help from Tsuyoshi Inajima.

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About Emilie Brandow

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