Almost half a century after founding his pioneering motor-maker on the family farm, Japanese billionaire Shigenobu Nagamori is handing over leadership of Nidec Corp. to a former Nissan Motor Co. executive to lead an ambitious pivot into the electric-vehicle space.
Jun Seki will take over from Nagamori as chief executive officer, the Kyoto-based company said last week as it announced better-than-projected annual results. The leadership change, which comes a little over a year after Seki’s move from Nissan, will be finalized when Nidec’s board meets June 22. Nagamori, who founded Nidec in a shack in 1973, will remain chairman.
Seki, 59, was appointed president of Nidec after leaving Nissan, where he was vice chief operating officer and an unsuccessful contender for CEO after Hiroto Saikawa resigned amid a compensation scandal, following the shock arrest of former chairman Carlos Ghosn.
The shift comes as Nidec pushes aggressively into the EV supply chain, betting that it can build on its success as a manufacturer of motors for everything from hard drives to power plants. It’s zeroing in on traction motors, the second-most expensive component of an EV.
Seki said in an interview in December that Nidec will seek to make them cheaper and better, and wants to court Tesla Inc. Nidec has built a strong presence in China’s booming EV-parts sector, supplying motors to Guangzhou Automobile Group Co. as well as France’s Peugeot SA.
“After working with Seki for the past year, I know his management style is very similar to mine, ” Nagamori said at a briefing. “With quick judgment and quick decision-making, the ability to lead from the top and personality — all these make him a worthy successor.”
While there could be some negative short-term market reaction given Seki’s lack of track record at the company, it “will not change Nidec’s DNA,” Jefferies analyst Yoshihiro Azuma wrote in a note, adding that Nidec will “maintain its core advantages of solid execution, fast capacity ramp-up, targeted investments and cost-cutting capability.”
In the December interview, Seki said the company is looking to Europe as the next major region of growth. Nidec has unveiled plans to build two factories in Serbia and expects to spend ¥200 billion ($1.85 billion) building out its operations in the country and wider Europe over the next decade.
Though not a household name, Nidec is already the world’s largest supplier of brushless motors, which are used in products ranging from air conditioners to factory robots. With the pandemic keeping people at home and manufacturers seeking to automate factory operations, appetite for appliances, air and heating systems and robots is fueling strong demand for its key products.
Nidec said Thursday its operating profit for the fiscal year through March rose 45% to ¥160 billion. The average estimate from analysts was for operating profit of ¥158 billion. Looking ahead, Nidec forecast ¥180 billion in profit for this fiscal year, short of the ¥199 billion predicted by analysts.
The strong year and sustained investment in its appliance, industrial and automotive motor businesses bodes well for Nidec’s growth prospects. By bolstering global production capacity, the company aims to achieve ¥10 trillion in annual net sales by fiscal 2030.
“Nidec practices a domination strategy,” making use of acquisitions to realize higher market share and lower costs, which creates room to cut prices and further expand its presence, SMBC Nikko Securities Inc. analyst Hiroharu Watanabe wrote in a report earlier this month. SMBC Nikko almost doubled its price target on Nidec shares to factor in the long-term business value of the company’s EV motor business.
Profitability is also being bolstered by steady cost cuts, according to Bloomberg Intelligence analyst Masahiro Wakasugi.
“The rules of the game are very simple: having larger capacity and lower cost matters a lot, and everything else is noise,” Azuma at Jefferies wrote. “Nidec can realize much larger-scale and much lower-cost production of traction motor systems than its peers, simply because it knows motor mass-production much better, is better at ramping up capacity faster, and is financially flexible enough to do so.”
The shift into EV motors is underpinned by the bullish outlook for electric cars, which has lured investors over the past year, briefly making Tesla’s Elon Musk the world’s richest man, and propelling the valuations of some smaller Chinese electric carmakers above those of traditional players.
Despite the pandemic, global EV sales climbed 39% in 2020 to 3.1 million units, compared with a decline of 14% in the total passenger car market, according to technology consultancy Canalys. Annual EV sales are projected to exceed 48 million units by 2035, according to BI, while the market for EV motors is estimated to be worth $29 billion by 2026, consultancy Shibuya Data says.
Nidec is targeting a 40%-45% share of the market and is backing that with a pledge to invest close to $10 billion over the next five years in building production capacity and acquiring necessary technologies and resources. In February, the company said it would buy Mitsubishi Heavy Industries Ltd.’s gear-making unit as it seeks to produce more of the electric motor part in-house.
Under Nagamori’s leadership, Nidec came to be regarded as a bellwether of manufacturing trends, picking up early on shifts such as the growth of factory automation. He also relied heavily on acquisitions, building the company’s exposure to new technologies and markets through savvy deal-making.
“I feel like I’m taking the stage right after someone who is very good at karaoke,” Seki said at Thursday’s briefing. “But I also think that I’m a pretty good singer.”
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