The slide in the EV sector continued as Nidec Corp. dropped the most in over 12 years after missing on quarterly earnings, highlighting the weakness across the global market for electric vehicles.
The Japanese electric motor maker saw shares fall by as much as 11% on Tuesday in Tokyo, the biggest slide the stock has seen since March of 2011. The company is a key supplier to manufacturers, from Apple Inc. to Tesla Motors. It reported a miss on the rise in quarterly operating income of 7.6% for September. Revenue was barely increased for the period.
The company’s underperformance highlights the softness of the automotive sector as the economy slows and interest rates have driven up borrowing costs. Last week Tesla tempered expectations in a call with the CEO, and signaled that the market was slowing. CEO Elon Musk blamed increased borrowing costs due to rising interest rates for causing potential buyers to hold off on purchases.
Meanwhile the smartphone market is looking at a collapse in demand, to levels not seen for about a decade.
Mio Kato, an analyst at LightStream Research said, “The EV sector looks challenged at the moment due to price pressure and there isn’t any clear sign that this will change soon. Investors have been complacent about Nidec’s long-term margin prospects and I think they will struggle to generate double-digit margins in the future.”
At a press briefing on Tuesday, Nidec Chief Executive Officer Shigenobu Nagamori said the company is looking at a loss of ¥15 billion ($100 million) for its e-Axle business this fiscal year, however he said in the future they expect the operating profit will rise to 15%. The E-Axle is a traction system the company mass produces for EVs.
Nagamori noted the market for the E-Axle is in a price war with China, rather than seeking to increase its quality, saying, “We shouldn’t engage in a competition that doesn’t recognize our value.” He added the company is looking to expand its strategy from focusing on China to entering the markets in Japan, the US, and Europe.
Nidec made ¥2.24 trillion ($15 billion) in revenue for the fiscal year that ended in March. It experienced losses in its automotive division, which has been attempting to gain penetration into the market for traction motors in electric vehicles, as the company was forced to invest in restructuring costs.
The company is hoping to produce a rapid recovery in this fiscal year, with plans to reach ¥10 trillion in sales by March 2031, according to Nagamori.
At 79 years of age, Nagamori has come to be known over the last 50 years as one of the most capable executives in Japan when it comes to mergers and acquisitions, having purchased dozens of businesses which have been merged into Nidec. However despite his reputation, he has been unable to find a successor who would help him to reach his planned objective of quadrupling the company’s sales.
