Chip shortage in focus as Japan automakers ready to report profit drop

While Japan’s biggest automakers report what analysts expect to be depressed earnings this week, investors looking for trading cues will be tuned into any assessment of the future impact of a global chip shortage that has forced a shake-up in production.

Automakers worldwide have had to adjust or suspend production in the past few months as factors including a surge in demand for electronic devices plus U.S. sanctions against Chinese technology firms led to a dearth of semiconductors.

Blackouts in Texas where a number of chipmakers have factories and a fire at Renesas Electronics Corp’s (6723.T) chip plant in Japan have exacerbated the supply crunch.

“The big question will be by how much automakers reduce earnings forecasts due to the slowdown in production and, consequently, lower sales,” said analyst Julie Boote at Pelham Smithers Associates.

“What should be an otherwise strong (post-pandemic) recovery year could be somewhat dampened by the supply predicament.”

Still, tighter supplies yet robust auto demand is pushing up vehicle prices, particularly in the United States, providing a buffer to automakers’ earnings, analysts said.

For the year ended March 31, Toyota Motor Corp (7203.T) – the world’s largest automaker by vehicle sales last year – is set to report a 12.5% drop in operating profit at 2.1 trillion yen ($19.30 billion), showed Refinitiv SmartEstimate based on 24 analyst estimates.

Profit is likely to rebound to 2.6 trillion yen in the current fiscal year started April 1, Refinitiv SmartEstimate showed.

While many global rivals were forced to slash production due to the chip shortage, Toyota has so far been largely unscathed, likely due to its chip stockpiling policy, analysts said.

Honda Motor Co Ltd (7267.T) will likely report an 11% fall in profit at 560 billion yen, while Nissan Motor Co Ltd (7201.T) is set to report a loss of 142 billion yen, widening from a 40.5 billion yen loss a year prior, Refinitiv SmartEstimate showed.

Honda’s profit is likely to reach 791 billion yen in the current business year, and Nissan is likely to swing to a profit of 141 billion yen, according to Refinitiv SmartEstimate.

Nissan is scheduled to report earnings on Tuesday, followed by Toyota on Wednesday and Honda on Friday.

($1 = 108.8300 yen)