FY2011 Plans of Japanese OEMs

 Domestic production of Japanese OEMs stayed at about 40% of that of the previous year in March and April due to the Great East Japan Earthquake in March 2011. Fortunately, the production recovered in July to around 90% to the level of the previous year, which was boosted by the government eco-car subsidy. In short, their production capacities have come back to normal. The OEMs will increase production by 10 to 20% over the previous year starting this autumn.

 OEMs' FY2011 business forecasts were unveiled one after another starting in the middle of June after the delays due to the earthquake. In the earnings announcements of the first quarter FY2011 (announced until early August), Toyota and Honda revised their business forecasts upward. Overall FY2011 business forecasts of ten Japanese OEMs are as follows: on a year-over-year basis, the sales volume will be up by 4.5% to 21.477 million units, revenues will be up by 0.7% to 46.8 trillion yen, operating profit will be down by 23.4% to 1.47 trillion yen, at an assumed exchange rate of 80 yen to the US dollar.

 Unfortunately, the yen continued to rise after August and stayed at the upper 76 yen zone to the dollar. If the yen remains this high, each Japanese OEM will have to revise the assumed rate, which would erode their business results (Toyota revised the FY2011 initial assumption of exchange rate from 82 yen to 80 yen to the dollar in the first quarter earnings announcement).

Overviews of Japanese OEMs' FY2011 plans and 1Q business results

As a consequence of the Great East Japan Earthquake in March 2011, Japanese OEMs had to suspend or reduce their production. Their production has been back to normal since this summer. Overall the domestic production volume of eight passenger car OEMs dropped to 42.5% in March and 39.9% in April of that of the previous year. It has gradually recovered to 68% in May and 84.8% in June. In July, the total production was back to 90.6% of the level for the same month last year. It is close to their normal production capacities, considering the increase in production last year when there was a rush demand before the expiration of the government eco-car subsidiary.

The overall accumulated production volume of eight OEMs was up to a total of 81.7% on a year-over-year basis in the period covering April to July 2011. The domestic production reached 72.2% and the overseas production 88.2% on a year-over-year basis. Some of the eight companies which announced their full-year production plan (fiscal year basis) set a production target at even or higher by 10% over the level of the previous year. They plan to increase production by 10% or 20% starting this autumn.

Source: The table compiled from OEMs' press releases

In FY2011, ten Japanese OEMs plan to sell 21.477 million units (consolidated sales volume basis), up by 4.5% over the previous year. Noteworthy is that Nissan plans to increase sales by 9.9% to 4.6 million units (global sales volume basis), in an attempt to have the second consecutive record sales volume since FY2010. Toyota and Honda revised their initial plans upward in the first quarter earnings announcements. Toyota initially planned to sell 7.240 million units in FY 2011-a decrease by 0.9% from previous year; however, they revised the plan upward to indicate an increase by 4.0% to 7.600 million units. Honda also initially planned to sell 3.300 million units in FY2011 down by 6.0% on a year-on-year basis; but they revised the plan upward to a decrease by 2.2% to 3.435 million units. In addition to the above OEMs' plans, Daihatsu and Fuji Heavy have a sales volume plan for FY 2011 that is lower than the FY 2010 level.

Overall, OEMs plan their FY2011 domestic sales volume of 4.312 million units, up by 1.9% over the previous year, when the auto industry was jolted by the expiration of government subsidiary for eco cars and the Great East Japan Earthquake. Three OEMs including Honda which had a great effect of the quake and two mini-car OEMs, namely Suzuki and Daihatsu, forecast a drop in their domestic sales volume. Ten OEMs plan to increase FY2011 overseas sales volume by 5.1% to 17.165 million units in total. Of them, Nissan and Suzuki plan to increase overseas sales by around 10%.

Consolidated sales volume in the first quarter of FY2011 was down by 20.9% to 3.929 million units from a total of ten OEMs. Their domestic sales volume was down by 31.6% to 732 K units. There was only a small decrease in the sales volumes of Nissan, Mitsubishi and Fuji Heavy Industries; this was because production at Nissan made a quick recovery, Mitsubishi has plants in western Japan, and Fuji Heavy increased the number of models to sell. Total overseas sales volume was down by 17.9% to 3.198 million units in total of the ten OEMs. Yet, Nissan, Mitsubishi and Suzuki recorded an increase in the overseas sales over the same period last year.

Ten Japanese OEMs plan FY2011 consolidated revenues of 46.8 trillion yen in total. Specifically, Nissan plans an increase in consolidated revenues by 7.1% to 9.4 trillion yen. If Nissan achieves the planned figure, Nissan will surpass Honda on revenues due to the projected revenue for Honda in the same period being 8.7 trillion yen (down by 2.6%). Mazda and Fuji Heavy Industries expect to have a decrease in revenues by 5.8% and 6.4%, respectively.

The total revenues of ten OEMs were down by 20.5% to 9.3 trillion yen in the first quarter of FY2011. A revenue drop of more than 20% was recorded due to the earthquake, while Nissan and Mitsubishi recorded an increase in sales volume and in revenues by 1.6% and 7.0%, respectively. In contrast, Toyota, Honda and Mazda recorded a decrease in earnings by approximately 30%.

Source: OEMs' financial brief notes and earnings announcement documents
NOTE: Domestic/overseas earnings represent earnings by location of external customers.

For the FY 2011, most Japanese OEMs' plans lower profits on a year-on-year basis. Ten OEMs projected a fall in operating profit by 23.4% to 1.47 trillion yen, in current profit by 28.2% to 1.51 trillion yen, and in net profit by 22.2% to 1.06 trillion yen. Honda, in particular, forecasts a nose-dive in three profit items by more than 50%. On the other hand, Suzuki, Mitsubishi and Hino project an increase in all profit items. Mazda has also forecasted a positive net profit for the first time in four years.

In the first quarter of FY2011, Japanese OEMs had a significant drop in profits except Mitsubishi. Toyota recorded a negative operating profit of 108.0 billion yen and a negative pretax profit of 80.5 billion yen (the net profit was a positive 1.1 billion yen). Mazda recorded in the negative for three profit items.

Most Japanese OEMs assumed the exchange rate of 80 yen to the US dollar for FY2011 at the first quarter earnings announcement, while Mazda assumed 83 yen and Fuji Heavy 81 yen to the dollar. Toyota assumed the rate of 82 yen to the US dollar in the announcement of the initial full-year business forecast as of June 10, 2011, when the exchange rate hovered at the low level of 80 yen to the dollar. However, the yen rose further than expected to the high 70 yen zone after the middle of July. Toyota, therefore, raised their calculated rate to 80 yen to the dollar in the earnings announcement of the first quarter (August 2). The exchange rate hovered mostly at the upper 76 yen range to the dollar during August.

NOTE: If OEMs announced a number of assumed exchange rates, their respective exchange rates used for sales are included in the table above.

Ten OEMs' forecasts of their respective FY2011 operating profits and their FY2010 records caused a difference of negative 448.7 billion yen. Positive effects on the profits are 228.9 billion yen from a fluctuation in sales and 152.7 billion yen from cost reduction. Dampers for the operating profits are 430.8 billion yen from exchange fluctuation and 330.1 billion yen increases in overhead, R&D costs, etc.

The FY2011 capital investment plans of ten OEMs will be up by 31.3% over the previous year to 2.056 trillion yen in total, which will be a two-year increase in the capital investment. Ten OEMs project a depreciation of 1.426 trillion yen in total. The capital investment will exceed the depreciation for the first time in three years. Plans for R&D costs will be increased by 9.7% to 2.153 trillion yen. It is likely to exceed two trillion yen for the first time in three years.

Source: OEMs' financial flash reports and earnings announcement documents
NOTE: Nissan's capital investment and depreciation have included the figures related to the Finance Lease since FY2008 (those until FY2007 were not included). The FY2007 investment is 516.4 billion yen according to the same FY2008 standards.

＜全球汽车产业平台 MarkLines＞