TOKYO (JAPAN) – Japanese automakers Toyota, Nissan and Honda report third quarter results this week boosted by bringing back demand in China and the United States. In addition to it, a global chip shortage has cast doubts on their earnings outlook.
There has been a surge in demand for electronics as more people have been indoors due to the coronavirus pandemic, which has further led to shortages of semi-conductors. Such a situation has forced the carmakers to reduce production during a time when sales have found a recovery more quickly than expected.
Compatriots Subaru Corp and Mazda Motor Corp have brought down production as well, like other automakers including Volkswagen AG.
James Hong, an analyst at Macquarie Capital, said that Korean rivals have a larger number of local suppliers, coupled with a healthier chip stockpile, “Chip shortage seems to have a larger impact on Japanese and Europeans as the shortage is mainly caused by NXP Semiconductors and Infineon.”
Chipmakers who help auto companies in the outsourcing of most of their production so as to contract manufacturers like Taiwan’s TSMC. This, according to the analysts often lead to a prioritisation of orders from electronics clients, which make for nearly all their revenue.
The supply shortages were aggravated by the previous US administration’s stringent measures to control technology transfers to China, which affected Chinese chip factories. A fire at a chip plant in Japan and coronavirus lockdowns in Southeast Asia also hit the same.
Analysts polled by Refinitiv expect Toyota, the world’s largest automaker by vehicle sales, to estimate a profit of 1.5 trillion yen ($14.22 billion) for the year, which will end on March 31. That compares with a 1.3 trillion yen profit Toyota forecast in November.
Refinitiv data shows that Honda will likely forecast a profit of 463.6 billion yen, when compared with its forecast of 420 billion yen. According to sources, Honda will cut down its domestic production this month, which is predominantly of models such as the Fit subcompact and the N-series mini-vehicle.
Nissan is likely to forecast a 230.09 billion yen operating loss for the full year, as per Refinitiv, down from a loss forecast of 340 billion yen.
It is however not clear as to how long the chip shortage will last.
Macquarie Capital expects auto production to have an impact until mid 2021, as chipmakers work towards boosting production. Moreover, data firm IHS Markit said the shortage could last until the third-quarter of this year.