• Reuters

Nidec Cuts Profit Forecast as Chinese EV Competition Ramps Up

REUTERS/Kim Kyung-Hoon
Nidec Corp’s logo is pictured at an earnings results news conference in Tokyo, Japan, July 25, 2018.

TOKYO (Reuters) – Japanese electric motor maker Nidec Corp slashed its full-year operating profit forecast by nearly a fifth on Wednesday, warning of uncertainty in demand and intensifying price competition in China’s electric vehicle market.

The sobering outlook for the company’s signature e-axle traction motor business highlights the challenges parts makers face in the world’s biggest auto market, as a price war and fewer subsidies for EV buyers has raised pressures to cut costs.

The Kyoto-based manufacturer cut its operating profit forecast for the financial year to March 31 by 18% to 180 billion yen ($1.22 billion), versus an average forecast of 219.7 billion yen from 18 analysts surveyed by LSEG.

Kazuyoshi Saito, a senior analyst at Iwai Cosmo Securities, said the news suggested it may take longer than expected for Nidec to revitalize the e-axle traction motor business, adding the company is known for its heavy dependence on China.

Nidec has invested heavily in developing and producing the motor, which combines an EV’s gear, motor and power-control electronics, and is keen to expand the business.

“It feels like it won’t be able to survive unless they implement a major change in strategy,” Saito said, commenting on the traction motor business in China. “I’m concerned it will be a negative surprise for the stock price.”

Prices in China began to fall when Nidec started making the second generation of its motor, dropping to levels well below those its chairman and founder Shigenobu Nagamori had envisaged.

“I have been running a company for 50 years,” Nagamori told a press conference. “This is my first time running a business like this, as our competitors, ourselves and our customers are all in the red,” he added, addressing the motor business and China’s EV market.

Nidec expects up to 40 billion yen in one-off costs to turn around the motor business via measures such as limiting unprofitable orders and localizing product development and procurement.

Last March, Nidec lined up five contenders to become president from April and eventually take over as chairman four years later. It will announce the winner next month, Nagamori said.

Third-quarter operating profit nearly doubled to 53.6 billion yen from 28.0 billion yen a year earlier. That was slightly lower than the average forecast of 55.6 billion yen in a survey of eight analysts by LSEG.

$1 = 147.9500 yen