Production capacity at Japanese carmakers is recovering faster than they initially forecast after the March 11 quake and tsunami, but winning back their overseas market shares lost in the aftermath of the disaster remains a challenge, analysts say.
With the carmakers announcing belated earnings forecasts for the current business year with expected falls in profits, how fast they can increase overseas production is another key to improving their earnings amid the yen’s strength, the analysts said.
Nissan Motor Co. said Thursday its group operating profit for the business year to next March is expected to fall 14.4 percent to ¥460 billion, as profits will be eroded by the stronger yen against the dollar and higher raw materials costs.
Nissan said its group net profit is projected to drop 15.4 percent to ¥270 billion. Sales are expected to reach ¥9.4 trillion, against ¥8.77 trillion the previous year.
“Production and sales have already returned close to normal conditions,” Nissan Corporate Vice President Joji Tagawa told a news conference in Yokohama.
The company expects production at all of its plants to come back fully in October as parts suppliers recover their output, he said.
Earlier this month, Toyota Motor Corp. said it expects its group operating profit for the business year to fall 36 percent, while Honda Motor Co. is projecting a 65 percent lower operating profit.
“Their production will recover soon once the capacity returns. But that doesn’t mean their earnings will come back at the same time,” said Masato Sase, in charge of the automobile sector at Deloitte Tohmatsu Consulting Co., adding that Japanese automakers will face different market environments because they lost some of their global share while struggling with power and parts shortages that slowed output.
In the U.S. market, for example, Toyota’s new car sales dropped 33.4 percent in May from a year earlier, while Honda’s sales dropped 22.5 percent and Nissan’s fell 9.1 percent.
In contrast, Hyundai Motor Co.’s new car sales gained 20.7 percent and Kia Motors Corp.’s increased 53.4 percent, according to Autodata.
As a result, Toyota’s share in the U.S. market fell 4.6 percentage points to 10.2 percent that month, Honda was down 2.0 percentage points at 8.6 percent and Nissan was down 0.4 percentage point at 7.2 percent, while Hyundai and Kia as a group rose 2.8 percentage points to 10.2 percent, according to U.S. National Automobile Dealers Association.
Another focus will be on shifting production overseas, particularly in emerging markets.
“It would be natural for Japanese automakers to have stronger momentum to shift production focus to other countries amid the current strength of the yen and the strong demand in the global vehicle market,” said Issei Takahashi, auto analyst at Credit Suisse in Tokyo.
Currently, Toyota produces about 50 percent of its vehicles overseas, compared with around 70 percent for Nissan and Honda.
Toyota has admitted that the strong yen will be a burden on domestic production. In May, Executive Vice President Satoshi Ozawa said the recent sharp rise in the yen is hampering the company’s efforts to maintain domestic production and employment.
Toyota already has a plan to open a plant in Blue Springs, Mississippi, this autumn to assemble Corolla compacts for sale in the U.S. market, rather than assembling them in Japan and exporting them.
At the same time, Toyota reportedly said it can retain global competitiveness if it can cut costs by around 20 percent, even if the dollar sticks to an exchange rate of ¥80.
Nissan is aggressively shifting production overseas. Last July, it moved its all-new March compact to Thailand instead of at its plant in Oppama, Kanagawa Prefecture.
Nissan imported 26,965 March cars from Thailand in 2010.
Analysts say this tactic increases the competitiveness of Japanese automakers because they can assemble their cars at a lower cost and then import them for the domestic market.