Nidec Corp. slumped the most in more than 12 years after reporting quarterly earnings that missed estimates, underscoring weakness across the global electric vehicle and electronics arenas.
The Japanese firm’s shares fell as much as 11% Tuesday in Tokyo, its biggest drop since March 2011 intraday. Nidec, a key supplier to EV and electronics makers from Tesla Inc. to Apple Inc., reported a less-than-projected 7.6% rise in September quarter operating income. Revenue barely grew during the period.
Nidec’s underperformance reflects a soft automotive market during an economic downturn. Tesla last week tempered its growth expectations and signaled pain ahead. Chief Executive Elon Musk blamed rising interest rates in the US for driving electric car buyers to the sidelines. The smartphone market, meanwhile, is grappling with its worst demand in about a decade.
“The EV sector looks challenged at the moment due to price pressure and there isn’t any clear sign that this will change soon,” said Mio Kato, an analyst at LightStream Research. “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.”
The company expects a loss of ¥15 billion ($100 million) in its e-Axle business this fiscal year, but it’s looking at an operating profit margin of 15% in the future, Chief Executive Officer Shigenobu Nagamori said at a press briefing on Tuesday. E-Axle is a traction motor system for EVs that’s mass-produced by Nidec.
The e-Axle market is seeing a price war in China rather than quality improvement, Nagamori said. “We shouldn’t engage in a competition that doesn’t recognize our value,” he said, adding that the company plans to broaden its strategy from a China-focused one to include Japan, the US and Europe.
Nidec Drops 10% as Operating Profit Misses Estimate: Street Wrap
Nidec posted ¥2.24 trillion ($15 billion) in revenue for the fiscal year that ended in March. During the period, it reported losses in its automotive business, which is seeking to expand in the market for traction motors used by electric vehicles, due in part to restructuring costs.
Nidec is aiming for a sharp recovery this fiscal year. The company harbors ambitions of achieving ¥10 trillion in sales by March 2031, Nagamori has said.
Nagamori, 79, has built a reputation over the past 50 years as one of Japan’s most successful executives when it comes to M&A, having bought dozens of business to fold into Nidec, which he founded in a shack. Even so, he’s struggled to find a successor who can help him reach his goal of quadrupling the manufacturer’s sales.
Read more: Tesla’s Slowing Growth Is Sending a Warning to All EV Makers
--With assistance from Katrina Nicholas and Yuki Furukawa.
(Updates with CEO comments from company briefing)