Japanese OEMs aim for record high sales in FY2013

 With correction of the yen appreciation, recovering Japanese economy, improved US market and increased sales in Asia, Japanese OEMs plan to achieve the record high sales and profits in FY2013. They will also make the largest investment in history in facilities and R&D, aiming for future growth.

 The ten Japanese OEMs plan to renew the record sales for the second year with a total of 24.83 millions automobiles in FY2013, up 6.2% year-on-year basis. In North America, the seven Japanese passenger car OEMs plan a total sales of 7.0 million units, up 6.7% y/y and in Asia and other regions, they plan to increase the combined sales to 10.7 million units, up 8.9% y/y. The Japanese OEMs, except for Mazda and Mitsubishi, aim to break their records. Toyota Group plans to exceed the 10 million units mark with 10.10 million units.

 The ten OEMs' combined target for the FY2013 consolidated revenues is JPY 57.5 trillion, up 11.1% y/y, approximately JPY five trillion less than the record high of 62.3 trillion JPY, down 8%. Nissan, Honda, Daihatsu, FHI and Hino aim to break their records.

 Each Japanese OEM plans to increase profit in FY2013 and the total operating profit of the ten OEMs is projected to increase by 34.9% y/y to JPY 3.92 trillion, approximately JPY 600 billion less than the record profit achieved in FY2007.

 The average assumed exchange rate of the Japanese OEMs is JPY 92.3 to the U.S. dollar, 10 yen lower than the previous year's, which is expected to raise the combined operating profit to 1,071.9 billion yen. As of the end of May 2013, the exchange rate hovers around JPY 101 to the dollar. If the rate stays at this level, it is highly likely that the business results outlook will be revised upward.

 According to LMC Automotive Forecast in April 2013, Japanese light vehicle sales in 2013 will fall by only a small amount to just under 5.2 million units. The global research company has been raising its Japanese sales forecast every month, starting from 4.7 million units estimated for January. LMC Automotive points out as follows : "LMC also notes that risks to the forecast are currently on the upside - the market may outperform expectations. In Japan, sales continue to be buoyed by the rising expectation that the "Abenomics" will lift the economy out of two decades of stagnation. The selling rate (SAAR) averaged a solid 5.2 million units in Q1 2013. Sales are projected to surge higher ahead of the scheduled consumption tax hike in April 2014."

Japanese OEMs' FY2012 outlooks (figures in shaded cells represent record high)

Source: OEMs' financial flash reports and earnings announcements
(Note) "Total" does not include the consolidated data of Daihatsu and Hino to avoid overlaps with Toyota.

 The ten Japanese OEMs plan to sell a total of 24.83 million automobiles on a consolidated basis in FY2013, up 6.2% from the FY 2012 results, renewing the record for the second straight year. Although the government's new car purchase subsidies ended in Japan, they plan a total of 4.832 million consolidated unit sales in Japan, only 0.3% drop from the previous year, thanks partly to upturn in economy. For the FY2013 consolidated unit sales overseas, their plans total approx. 20 million units, up 7.9% y/y.

 Looking at the OEMs respectively, those except for Mazda and Mitsubishi aim to break their records. Toyota plans to sell 9.1 million units on a consolidated basis and to exceed the 10 million units mark with 10.10 million units as the Toyota Group including its non-consolidated Chinese JV. Both Honda and Mitsubishi plan a great increase in sales, 10.4% y/y (4.43 million units) and 18.4% y/y (1.17 million units) respectively with emphasis on Japanese and Asian markets.

 By region, the seven Japanese passenger car OEMs plan a total sales of 6.983 million  units, up 6.7% y/y, in North America, the same seven million units' level as prior to the economic crisis. In Asia and other regions, they plan to increase the sales to 10.695 million units in total, up 8.9% y/y.

 The ten OEMs' FY2012 total sales greatly increased to 23.376 million units, up 14.0% y/y, the record high exceeding the result prior to the economic crisis in FY2007. Sales expanded in Japan due to the government subsidies as well as in North America and Asia excluding China. Seven OEMs renewed their records: Nissan for the third consecutive year, Hino for the second consecutive year, and Honda, Suzuki, Daihatsu, FHI, and Isuzu.

 The ten Japanese OEMs' targets for the FY2013 consolidated revenues total JPY 57.5 trillion , up 11.1% y/y. While their total unit sales are planned to renew the record high volume, the projected total revenue stays approximately JPY five trillion less, down 8% y/y, than the record high of JPY 62.3 trillion.

 Looking at the OEMs respectively, Honda, Daihatsu, FHI and Hino aim to rewrite their records in revenue as well. Nissan also plans to achieve the highest revenue in history under the same accounting method used in FY2012 and before. Meanwhile, Toyota plans to increase its revenues by 6.5% y/y to JPY 23.5 trillion, which is 2.8 trillion less than its record high.

 In FY2012, all the ten OEMs raised their consolidated revenues and achieved JPY 51.7 trillion in total, up 14.4% y/y. The OEMs with a large increase rate are FHI (26.1%), Honda (24.3%) and Toyota (18.7%). Notably, FHI's revenue increase rate of 26.1% almost doubled its sales volume increase rate of 13.1%, due to the improved product mix as a result of the withdrawal from the mini vehicle manufacturing.

 Each Japanese OEM plans to increase profit in FY2013 and the total operating profit of the ten OEMs is projected to increase by 34.9% y/y to JPY 3.92 trillion, which is approximately JPY 600 billion less than the record profit achieved in FY2007. The combined planned ordinary profit for FY2013 is JPY 4.03 trillion, up 36.8%, while the planned net profits for FY2013 are combined to be JPY 2.81 trillion, up 37.5%.

 Suzuki, Daihatsu, FHI, Isuzu and Hino plan to achieve the record highs in operating profit. Toyota aims to raise it by 36.3% y/y to 1.8 trillion JPY. Honda aims for 43.2% increase to JPY 780 billion and Nissan aims for 16.5% increase to JPY 610 billion.

 The FY2013 average assumed exchange rate by the Japanese OEMs is JPY 92.3 to the U.S. dollar. Toyota, Suzuki, Mazda, FHI and Hino assume a relatively high rate of 90 JPY to the U.S. dollar, while Nissan, Honda, Mitsubishi and Isuzu assume JPY 95 to the U.S. dollar. The JPY-USD exchange rate sensitivity totals approx. JPY 85 billion.

 The combined FY2012 operating profit of the ten OEMs was JPY 2.91 trillion, almost doubled the previous fiscal year results. Toyota posted JPY 1.32 trillion, approximately 3.7 times larger than the year before, exceeding JPY one trillion for the first time in five years. Mazda regained profitability, while Daihatsu, FHI, Isuzu and Hino renewed their record profits. Only Nissan, which posted the highest operating profit in FY2011, reported operating loss of JPY 523.5 billion, down 4.1% y/y, due to increased sales/production costs.

 The ten OEMs' combined FY2013 outlook in operating profit is JPY 1,013.7 billion larger than the FY2012 results. The factors for the expected increase are: JPY 1,071.9 billion of "changes from exchange rate fluctuation," JPY 401.6 billion of "changes in sales" and JPY 420.9 billion of "cost reduction and etc." The factors for the expected decrease are: JPY 610.6 billion increase in "overhead, R&D costs and etc." and JPY 270.1 billion increase in "other" factors.

 The ten OEMs' combined FY2012 operating profit amounted to JPY 2, 906.2 billion, JPY 1,487.7 billion more than the year earlier. "Changes in sales" accounted for JPY 1,077.4 billion increase, "cost reduction and etc." accounted for JPY 942.6 billion  increase and "changes from exchange rate fluctuation" accounted for JPY 257.4 billion increase. Increased "overhead, R&D costs and etc." accounted for JPY 700 billion decrease.

 The ten OEMs plan to spend a total of JPY 2,777 billion in capital expenditure in FY2013, up 15.6% y/y and the highest in five years. Honda, Suzuki, Mazda, Daihatsu, Isuzu and Hino plan the record high capital expenditure, while Toyota holds it down to JPY 910 billion, up 6.7% y/y but about 60% of its record high.

 The FY2013 combined R&D cost will be increased by 10.7% y/y to JPY 2,454 billion, the highest in history. Nissan, Honda, Suzuki, FHI and Hino respectively plan the largest R&D costs in history.

Source: OEMs' financial flash reports and earnings announcements
(Note) Honda revised its method of depreciation for its tangible fixed assets (excluding operating lease assets) from a fixed percentage method to a straight-line method from FY2012. As a result, the depreciation cost for FY2012 decreased by JPY 56.3 billion from the previous method.

 According to LMC Automotive Forecast in April 2013, Japanese light vehicle production in 2013 will decrease to about 9,116,000 units by 4.1 % and to 8,423,000 units in 2016. LMC Automotive explains in the report as follows: "our conservative view of sales is mirrored in production also with both domestic and export demand being possible sources of more positive demand. We see the chance of outperforming our current forecast as being significant. However, it is unclear whether Japanese vehicle exporters will be willing to use the increasing currency advantage to cut prices in export markets as this would have a detrimental brand impact in these markets. It may be more likely that repatriated profits will be increased, and this is something that is already happening."

<Automotive Industry Portal MarkLines>