Variables for the total operating income of the nine Japanese OEMs

  From the end of October to November 8th, 2016, the nine Japanese OEMs announced financial results for the first half of fiscal year 2016 (ends in March 2017) as well as revisions to their outlooks for the full year. This report will focus on the companies' new outlooks for the full year of FY 2016.

Vehicle sales: plans for an all-time high revised slightly downward

  The nine Japanese OEMs expected to sell a total of 26.36 million vehicles (year-over-year (y/y) increase of 2.3%) in FY 2016. Although this would be an all-time high, the total sales figures have been revised downward by 70,000 units from initial plans (announced along with the previous fiscal year financial results) due to the loss of last-minute demand that had been expected from the now delayed consumption tax hike in Japan, as well as downward revisions to vehicle sales in North America. However, Honda's healthy sales in Asia and North America, in combination with Fuji Heavy Industries' healthy sales in North America raised sales forecasts.

Operating income: Appreciation of the yen leads to a JPY 2.2 trillion loss in profits, but an increase when the impact of exchange rate fluctuations is excluded

  The total operating income forecast for the nine OEMs was revised downward slightly, and is expected to be roughly JPY 75 billion less than the original projection of JPY 3.91 trillion (y/y decrease of 28.3%), due to the greater than anticipated appreciation of the yen. By automaker, Honda and Suzuki revised their forecasts upward, and Nissan maintained its initial projection. Toyota lowered its operating income projection in its Q1 financial results announcement, but through emergency cost reductions, reverted to the original forecast of JPY 1.7 trillion. As of the first half of the fiscal year, the automaker had accomplished 66% of its yearly operating income forecast, and is expected to revise its forecast upward.

  Because the exchange rate has fluctuated from USD 1=JPY 120 in FY 2015 to a forecast of USD 1=JPY 104 in FY 2016, making for a major appreciation of the yen, each company has planned for major y/y losses. The total amount of financial impact will be roughly JPY 2.2 trillion. In order to offset losses caused by the fluctuation in exchange rates, the nine OEMs revised their sales mixes and are making efforts to reduce costs among other measures. The estimated total operating income for 2016, excluding the effects of exchange rates, is now JPY 6.1 trillion, making for a y/y increase of 12.8%. Individually, excluding Mitsubishi Motors, which is suffering from the effects of its fuel consumption scandal, as well as Toyota, the other seven OEMs have increased sales profits when the effects of changes in exchange rates are excluded.

  Japanese OEMs estimate the USD exchange rate for the second half of FY 2016 to be at an average of USD 1=JPY 102. If the current exchange rate of USD 1=JPY 109 (as of November 18) continues, the nine automakers will generate an increased operating income of JPY 300 billion.

Japanese OEMs' FY 2016 outlooks

Related Reports:

Japanese OEMs' Financial Outlook for FY 2016: Downturn in sales and profit due to foreign exchange (May 2016)