Japan carmakers predicted to bounce back quicker than they had in 2009

Demand in Japanese auto industry could “recover relatively quickly” once the pandemic nears an end, analysts at Goldman Sachs wrote in a report.
By : Bloomberg
| Updated on: 14 Apr 2020, 10:44 AM
FILE PHOTO: Imported cars are parked in a storage area at Sheerness port, Sheerness, Britain. (REUTERS)
FILE PHOTO: Imported cars are parked in a storage area at Sheerness port, Sheerness, Britain. (REUTERS)
FILE PHOTO: Imported cars are parked in a storage area at Sheerness port, Sheerness, Britain. (REUTERS)
FILE PHOTO: Imported cars are parked in a storage area at Sheerness port, Sheerness, Britain.

The coronavirus outbreak will reduce Japanese automakers’ combined operating profit by 38% this fiscal year, but the manufacturers may rebound faster than they did after the global financial crisis more than a decade ago, analysts at Goldman Sachs Group Inc. said.

Demand could “recover relatively quickly" once the pandemic nears an end, Kota Yuzawa and other analysts wrote in a report. Honda Motor Co. was upgraded to a buy rating, from a hold, by the bank, which said its valuation was attractive after a share decline of about 25% this year.

Similar Cars

Find More Cars
Honda Amaze (HT Auto photo)
Honda Amaze
1199 cc | Petrol | Manual | 18.6 kmpl
₹6.32 - 11.15 Lakhs**Ex-showroom price
Honda Jazz (HT Auto photo)
Honda Jazz
1199 cc | Petrol | Manual | 16.6 kmpl
₹7.48 - 10.17 Lakhs**Ex-showroom price
Honda New Jazz (HT Auto photo)
UPCOMING
Honda New Jazz
1199 cc | Petrol | Manual
₹8 - 12 Lakhs* *Expected Price
Honda Wr-v (HT Auto photo)
Honda Wr-v
1199 cc | Petrol | Manual | 16.5 kmpl
₹8.66 - 12.21 Lakhs**Ex-showroom price
Honda City-4th-generation (HT Auto photo)
Honda City-4th-generation
1497 cc | Petrol | Manual | 17.4 kmpl
₹9.3 - 10 Lakhs**Ex-showroom price
Honda All New City (HT Auto photo)
Honda All New City
1498 cc | Petrol | Manual | 17.8 kmpl
₹11 - 15.21 Lakhs**Ex-showroom price

The global auto industry, which was already seeing sputtering sales, is reeling from shutdowns aimed at preventing the spread of the pathogen, which has infected almost 2 million people across the globe. With showrooms shut, consumers aren’t buying cars and auto supply chains are in disarray, leaving factories idle. Toyota Motor Corp. and Nissan Motor Co. are among those that have sought financing to weather the storm.

FOLLOW US:Stay Updated with latest content - Subscribe us on
FOLLOW US:Stay Updated with latest content - Subscribe us on

(Also read: Fear of an impending price collapse grips auto industry)

“Most of the automakers are sufficiently well-placed in terms of net cash and shareholders’ equity to weather a steep fall in sales," the analysts wrote. “They should be able to overcome near-term declines in working capital. While circumstances vary, we do not expect across-the-board cuts or suspensions of dividend by automakers."

Operating losses for major Japanese automakers in April-June will probably reach 180 billion yen ($1.7 billion), according to the bank. Honda is well positioned for a recovery, however, thanks to “its compelling near-trough valuation post its recent correction, as well as its solid balance sheet, exposure to a recovering China, model cycle benefits, limited Europe CO2 risk, and motorcycle earnings support," the analysts said.

(Also read: Japanese auto giants to create fund to survive coronavirus, avoid job cuts)

“We also think Subaru Corp. looks compelling, as the company’s brand strengths are likely to prove advantageous once conditions normalize," said the analysts, who rate the stock a buy.

Nissan’s earnings outlook is “challenging" in the near term as it plans to cut jobs, they wrote. Its rating was kept at neutral. Although the automaker is ready to launch new products, “it will take time for this to translate into earnings due to the sharp decline in demand in the U.S. and European markets," they wrote. Nissan, Mitsubishi Motors Corp. and Mazda Motor Corp. will all probably suspend dividends in the current fiscal year, according to the bank.

First Published Date: 14 Apr 2020, 10:44 AM IST
Recommended For You
View All
NEXT ARTICLE BEGINS

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city
By clicking VIEW OFFERS you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city