Nidec Faces Cost Challenges in E-axle Traction Motor Business Amid EV Market Pressure

Summary

  • A gloomy projection for Nidec’s principal e-axle traction motor operations prompts a reflection on the obstacles auto parts producers in the largest global auto market are grappling with.
  • Amid a pricing battle and diminished EV customer subsidies, there’s mounting urgency to reduce expenditures.
  • Nidec’s operation profit estimate saw an 18% decrease for this fiscal year.
  • Nidec’s heavy dependence on China’s market might delay the revival of its e-axle motor operations.
  • Nidec’s commitment to growth is evident through its hefty investments in the development and manufacture of the e-axle motor system.
  • Concerns over the stock price being negatively affected due to business strategies in China are growing.

The Pressure on Nidec’s e-Axle Traction Motor Business

Unsettling predictions for Nidec’s renowned e-axle traction motor enterprise underscore the struggles that auto parts manufacturers contend with in the world’s largest auto industry. Increasing rivalry over pricing and diminishing EV incentives have heightened the need for economical measures.

Nidec’s Financial Outlook and Market Dependence

The manufacturer based in Kyoto has revised its operating profit outlook for this financial year ending March 31 downwards by 18%, expecting a yield of 180 billion yen ($1.22 billion), as opposed to the 219.7 billion yen anticipated by 18 analysts surveyed by LSEG. According to Kazuyoshi Saito, a senior analyst at Iwai Cosmo Securities, these developments hint that Nidec’s e-axle traction motor division might take longer than anticipated to recover, given its significant reliance on the Chinese market.

Investing in the e-Axle Motor System

Notably, Nidec has committed vast resources to the creation and manufacture of the motor system, an amalgamation of an EV’s gear, motor, and power-control components, with an aim to spread its ventures.

Saito expressed worries about the motor business in China, hinting at a potential negative influence on the stock price unless a profound strategy shift is implemented. “I fear its survival is jeopardized unless major strategic changes materialize,” stated Saito.

The Challenge of Operating in China’s EV Market

Nidec’s chairman and founder Shigenobu Nagamori confessed to ongoing struggles while operating the motor business in China’s challenging EV marketplace. The company has suffered financial loss following a fall in its motor prices in China when it began manufacturing the second generation of its motor system.

The Path to Business Recovery

To salvage the motor business, Nidec anticipates up to 40 billion yen in one-off costs via strategies such as curtailing unprofitable orders and localizing product development and procurement.

Leadership Transition and Financial Performance

Nidec—which has already singled out five potential successors who could take the helm from April—expects to declare its chosen president and future chairman next month, according to Nagamori. Meanwhile, compared to the previous year, the third-quarter operating profit nearly doubled to 53.6 billion yen, falling slightly short of the average 55.6 billion yen projection from an LSEG survey featuring eight analysts.

This news could potentially affect trading patterns and forex markets, particularly those assets tied closely to the EV industry and the Chinese auto market. ($1 = 147.9500 yen)

PIP Penguin
Logo