Connect with us

Hi, what are you looking for?

BUSINESS

Nidec shares logest tumble in 15 years on China chill

FILE PHOTO:Nidec Corp's logo is pictured at an earnings results news conference in Tokyo, Japan, July 25, 2018. REUTERS/Kim Kyung-Hoon/File Photo
FILE PHOTO:Nidec Corp's logo is pictured at an earnings results news conference in Tokyo, Japan, July 25, 2018. REUTERS/Kim Kyung-Hoon/File Photo

On Tuesday, shares of Nidec, a motor maker based in Japan, had their worst drop in more than a decade and a half, falling more than 10% as investor fears increased over the company’s prospects in the increasingly competitive Chinese market for electric vehicles.

A decrease in profitability at Nidec’s (6594.T) EV business in China underscores the challenges that component makers face in the world’s top auto market as car makers ratchet up the pressure on them to cut costs in the midst of decreasing demand growth for EVs and an aggressive pricing war. The Chinese market is now the largest auto market in the world.

The chairman and founder of the Japanese motor maker, Shigenobu Nagamori, stated during a press conference that the company now anticipates a loss of 15 billion yen ($100 million) for the whole year at its primary e-axle business, in contrast to the profit that it had previously seen. According to him, the level of price competitiveness in the Chinese market, which accounts for slightly less than a quarter of Nidec’s sales, is becoming increasingly difficult.

He stated that the business would “review its plans” to ensure it would generate good earnings. According to what he said, “We should not compete in areas where our products are not valued” appropriately.

Nidec has made significant investments to establish itself as a key participant in the supply chain for electric vehicles using the e-axle component. This component integrates the electric vehicle’s motor, gears, and power-control electronics into a single unit.

According to an article published on the Smartkarma research platform by analyst Mark Chadwick, “The e-axle market in China is shifting more rapidly than expected to lower output motors and this is having a detrimental impact on profitability.”

According to the statistics provided by LSEG, Nidec said after the market closed on Monday that its quarterly operating profit grew 7.6%, which was a lesser gain than the increase that experts had been expecting. In addition, it did not adjust its projection for full-year profits, which stood at 220 billion yen. The prediction of 224 billion yen was what the analysts anticipated seeing.

Its shares had their worst one-day decrease since November 2008, falling 10.5% to settle at 5,995 yen, erasing over $2.7 billion in market value.

Nidec’s fortunes demonstrate how China has transitioned from a source of nearly infinite development to a tough battlefield for Japanese manufacturers in just a few short years. This has occurred because Chinese consumers have shunned gasoline-powered offers from Japanese automakers in favor of electric vehicles (EVs) and indigenous brands.

Now, falling sales of electric vehicles in China are fueling a heated pricing war among manufacturers and, as a result, increasing the pressure on suppliers to reduce their costs.

This week will see the opening of the Tokyo Motor Show, and investors are becoming increasingly anxious about how Japanese firms such as Nissan (7201.T), who have placed a significant amount of their bets on the Chinese market, will be able to weather the storm of increased input prices and declining sales in that market.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

The future of technological innovation is here. Be the first to discover the latest advancements, insights, and reviews. Join us in shaping the future.
SUBSCRIBE

You May Also Like

Uncategorized

Two nonfiction writers filed a lawsuit against OpenAI and its financial supporter Microsoft (MSFT.O) on Friday in Manhattan federal court. They claim that the...

AI

Nvidia has expanded its reach in China’s EV sector. Four Chinese electric car makers will utilize Nvidia’s technology to power autonomous driving systems, demonstrating...

TECH

In a federal court case in California, shareholders sued Netflix (NFLX.O.), alleging that the streaming entertainment business concealed how much account-sharing was impeding its...

TECH

With its most costly wager in over ten years, Apple (AAPL.O) said it would begin selling its Vision Pro mixed-reality headset in the US...