Yahoo Finance Nidec Sees ‘Ocean of Red’ in China’s Competitive EV Market
(Bloomberg) -- Tesla Inc. supplier and motors maker Nidec Corp. slashed its full-year operating income guidance by almost 20% on what its chairman said was “an ocean of red” in China’s electric-vehicle market.
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Prices are plunging below cost due to fierce competition in China, where more than half of the world’s EVs are produced, threatening the market’s price-discovery mechanism, according to Nidec co-founder Shigenobu Nagamori.
“The more we make, the more our losses grow,” Nagamori said at a post-results earnings conference. “Our customers and our competitors are all in the red.”
The Kyoto-based maker of precision and automotive motors said it will need to book restructuring charges of about ¥45 billion ($300 million) in the current quarter, cut costs and limit unprofitable orders. To combat competition from other suppliers, Nidec will also need to localize product development and focus on higher-margin technologies, Nagamori said.
Together, those costs lower the company’s expected operating income for the year ending in March to ¥180 billion, down from a previous forecast of ¥220 billion.
Nidec, which also supplies Apple Inc., has struggled after growing for years through aggressive acquisitions under Nagamori’s leadership. It’s been fighting prolonged weakness in demand, coupled with the ascent of new rivals that’s putting pressure on margins.
Uncertainty over the company’s leadership has also weighed on the company, which saw the departure of Nagamori’s hand-picked successor Jun Seki in 2022. Lack of consistent management has slowed the company’s efforts to shift focus to smaller EV motors and on more profitable hard drives used in data centers and servers.
Nagamori, 79, who previously said he’s ready to spend billions of dollars in acquisitions to reach a ¥10 trillion sales target by March 2031, said he would announce his new successor next month.
Seki, a former Nissan Motor Co. executive, is now a chief strategy officer in charge of Foxconn’s EV push.
Nidec, whose shares have fallen 22% over the past year, also said it would buy back as much as ¥11 billion worth of its shares in the four months to May 24.
The company’s stock fell the most in more than 12 years in October after it reported earnings that missed estimates, due to weakness across the EV and electronics markets.
--With assistance from Edwin Chan.
(Updates with Nidec chairman’s comments at post-results meeting)
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