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TOKYO: Shares of Japan‘s Nidec logged their biggest decline in a decade and a half on Tuesday, tumbling more than 10% as investor concerns deepened over the motor manufacturer’s prospects in an increasingly tough Chinese market for electric vehicles.
A decline in profitability at Nidec’s EV business in China illustrates the headwinds parts makers face in the world’s top auto market, as car makers step up pressure on them to cut costs amid weakening EV demand growth and an intense price war.
The Japanese motor manufacturer now expects a 15 billion yen ($100 million) full-year loss at its key e-axle business, rather than the profit it had previously seen, chairman and founder Shigenobu Nagamori told a press conference. The Chinese market – which makes up just under a quarter of Nidec’s sales – was increasingly tough in terms of price competition, he said.
The company would “review its plans” in order to ensure healthy profits, he said. “We should not compete in areas where our products are not valued” properly, he said.
Nidec has invested heavily to become a key player in the electric vehicle supply chain with the e-axle component, which combines the motor, gears and power-control electronics in EVs.
“The e-axle market in China is shifting more rapidly than expected to lower output motors and that is having a detrimental impact on profitability,” analyst Mark Chadwick wrote on the Smartkarma research platform.
Nidec said after the market close on Monday that quarterly operating profit rose 7.6% rise, a smaller rise than analysts had been looking for, according to LSEG data. It also left its full-year profit outlook unchanged at 220 billion yen. Analysts were expecting a forecast of 224 billion yen.
Its shares tumbled 10.5% to close at 5,995 yen, marking its steepest one-day decline since November 2008 and wiping out some $2.7 billion in market value.
Nidec’s fortunes show how China has gone from a source of almost limitless growth to a fierce battlefield for Japanese manufacturers in just a few years, as automakers’ gasoline-powered offerings were bypassed by customers in favour of EVs and domestic brands.
Now, weakening Chinese EV sales are stoking an intense price war among automakers and subsequent pressure on suppliers to cut costs.
Tokyo’s auto show is set to open this week, with investors increasingly concerned about how Japanese players such as Nissan who have bet big on the Chinese market will manage to ride out higher input costs and slumping sales there.
($1 = 149.6400 yen)
A decline in profitability at Nidec’s EV business in China illustrates the headwinds parts makers face in the world’s top auto market, as car makers step up pressure on them to cut costs amid weakening EV demand growth and an intense price war.
The Japanese motor manufacturer now expects a 15 billion yen ($100 million) full-year loss at its key e-axle business, rather than the profit it had previously seen, chairman and founder Shigenobu Nagamori told a press conference. The Chinese market – which makes up just under a quarter of Nidec’s sales – was increasingly tough in terms of price competition, he said.
The company would “review its plans” in order to ensure healthy profits, he said. “We should not compete in areas where our products are not valued” properly, he said.
Nidec has invested heavily to become a key player in the electric vehicle supply chain with the e-axle component, which combines the motor, gears and power-control electronics in EVs.
“The e-axle market in China is shifting more rapidly than expected to lower output motors and that is having a detrimental impact on profitability,” analyst Mark Chadwick wrote on the Smartkarma research platform.
Nidec said after the market close on Monday that quarterly operating profit rose 7.6% rise, a smaller rise than analysts had been looking for, according to LSEG data. It also left its full-year profit outlook unchanged at 220 billion yen. Analysts were expecting a forecast of 224 billion yen.
Its shares tumbled 10.5% to close at 5,995 yen, marking its steepest one-day decline since November 2008 and wiping out some $2.7 billion in market value.
Nidec’s fortunes show how China has gone from a source of almost limitless growth to a fierce battlefield for Japanese manufacturers in just a few years, as automakers’ gasoline-powered offerings were bypassed by customers in favour of EVs and domestic brands.
Now, weakening Chinese EV sales are stoking an intense price war among automakers and subsequent pressure on suppliers to cut costs.
Tokyo’s auto show is set to open this week, with investors increasingly concerned about how Japanese players such as Nissan who have bet big on the Chinese market will manage to ride out higher input costs and slumping sales there.
($1 = 149.6400 yen)
