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Nikkei: The profit growth rate of Japanese car companies may slow down this fiscal year

Publish Date: 2024.04.18

  According to Nikkei, the profit growth of Japan's six major car manufacturers is expected to slow down in the 2024 fiscal year, as these companies have limited room for production growth but will face rising costs.


  Previously, Toyota, Honda, Nissan, Suzuki, Subaru, and Mazda all expected their net profits to increase in the previous fiscal year (as of March 31 this year). Among them, Toyota, Honda, Nissan, and Subaru are expected to see a net profit increase of around 50% to 80% in the previous fiscal year, and Toyota, Suzuki, and Mazda are expected to achieve a historic high in profits in the previous fiscal year.


  Image source: Toyota


  In addition to recovering production from supply chain issues, automakers also benefit from favorable factors such as rising prices and weak yen. According to the market average expectations compiled by QUICK Consumer in Japan, all six companies exceeded their respective expectations in the previous fiscal year.


  However, the market expects that in the fiscal year ending in March 2025, due to a high base and rising costs, the profit growth of car companies will be relatively small. Specifically, salary increases are expected to drive up labor costs in the United States, Japan, and other regions, while the development costs of electric vehicles and batteries, as well as the costs of materials such as steel, are also expected to drag down profits. In addition, the increase in production will also lead to more intense competition, so the incentive measures paid by car manufacturers to dealers may also increase.


  When car manufacturers announce their expectations, exchange rates are another factor worth paying attention to. In the previous fiscal year, the average exchange rate of the Japanese yen against the US dollar was slightly lower than 145 yen, but has since fallen to over 150 yen. Koji Endo from SBI Securities stated that in the first financial forecast released this fiscal year, "many companies may adopt more conservative exchange rates and expect profits to decline.".


  Some market observers also predict that profits for Japanese car manufacturers will ultimately increase due to strong performance in hybrid vehicles and the North American market. According to GlobalData's forecast, global demand for hybrid vehicles will increase by 20% to 6.82 million vehicles in 2024, while overall demand for light vehicles will only increase by 3% to 89.22 million vehicles.


  Toyota's share in the global hybrid vehicle market is about 60%, while Honda's share exceeds 10%. Therefore, the two companies may benefit from the increase in hybrid production.


  In addition, according to a report by Nikkei, sales in the entire North American market are expected to increase by 3% to 19.22 million vehicles. Among Japanese car manufacturers, at least 70% of Subaru's sales come from North America, and about 40% of Mazda's sales come from North America. The two companies plan to redesign their main models this fiscal year and launch new models in the US market. Nissan's sales in North America have slowed down, which may force the company to invest more funds in incentive measures. This month, its market value was once lower than its partner Renault.


  As of April 16th, Toyota's stock price has risen by 41% this year, Subaru has risen by 37%, and Honda has risen by 24%, all of which have outperformed the Nikkei Average's 15% increase.


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