By Pete Sweeney
HONG KONG: Optimistic Japanese carmakers are adding gas to a global autos rally. Toyota Motor, the world’s largest car manufacturer, and local competitor Honda Motor both cranked up profit forecasts this week as quarterly earnings surprised on the upside. If the growing shortage of semiconductors is their biggest headache, 2021 should be a good year.
To be sure, nobody will miss 2020. Although demand revived in the most recent quarter, prompting Toyota to hike its fiscal-year operating profit forecast 54% to 2 trillion yen ($19 billion), product sales fell by a fifth year-on-year in the nine months ending December, while margins contracted by over a percentage point.
Honda, which also upgraded its full-year forecasts, is still struggling to overcome the semiconductor chip crunch, as are peers like Nissan Motor, which remains in the financial doldrums.
But even Nissan now expects to lose less money than it projected a few months back. The recovery in the Chinese market, where the local industry body now expects sales to rise 4% in 2021 to surpass 26 million units, has recaptured the interest of investors who had abandoned conventional marques for sexy electric plays like Tesla and Nio. Finally, after years in the basement, a selective, conventional passenger vehicle stock boom has gotten underway.
Nissan is up 17% year-to-date; its alliance partner Mitsubishi Motors has gained 46%. Toyota now trades above 8,000 yen per share for the first time since 2015. In terms of multiples, Eikon data shows most of the Japanese brands are now trading near or above 10 times next year’s forecast earnings. So are American champions Ford Motor and General Motors, after their shares popped over 30% apiece since the start of January.
Part of this may be overflowing general market froth. And although the chip supply-chain bottleneck should ease by the summer, it is serious now, with many manufacturers around the world warning they will have to cut production. At the same time the Chinese market could prove unreliable; in January consumer prices deflated, a bad sign for demand, and it’s anyone’s guess whether car purchases will keep up the pace as stimulus is wound down. Even so, for now it seems that an early automotive spring has sprung.