There are many cars lined up at the port for importing and exporting cars.
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Japanese automakers are likely to be vulnerable to the fallout from the Iran war and a reversal in the yen.
toyota, honda and nissan Benefiting from historic currency weakness, the first two companies revised their full-year forecasts upward in their latest quarterly reports, with the latter posting its first profit in nearly two years. However, external factors may become less cooperative in the future.
In early August, the U.S. Treasury and Japan’s Treasury jointly coordinated an unprecedented yen-buying intervention in a historic move, as the yen fell above 163 yen to the dollar to a 40-year low. The move raised alarm signals as Japanese automakers traditionally rely on a weaker yen to make exported cars cheaper and more competitive in global markets.
“If government intervention leads to a stronger yen, it will be negative for Japanese automakers,” said Vincent Sun, senior equity analyst at Morningstar.
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Sun said the strong yen will force automakers to choose between raising prices in overseas markets, which could lead to a loss of market share, or reducing operating profits due to a decline in the yen equivalent of overseas profits.
Masahiro Akita, senior analyst at Bernstein, said, “Typically, a 1% change in the yen has an impact of about 2% on Japanese automakers’ operating profits.However, the sensitivity varies by company, and can reach about 4% for some automakers.”
Analysts also believe the ongoing Middle East conflict could cause problems, with Sun pointing to further disruptions to supply chains and increased costs. The Strait of Hormuz and the Red Sea are vital shipping routes for Japanese automakers, which rely on petrochemical products such as aluminum and naphtha for vehicle production.
Mr. Akita said, “The biggest headwind for automakers’ profits is the soaring raw material prices, which are intensifying amid the ongoing conflict in the Middle East.”
“Inflation across key inputs, including naphtha and resins, memory chips, and industrial metals such as aluminum, copper, and steel, linked to oil prices has had a widespread negative impact on industry profitability,” Akita added.
