High Dependence on the Automotive Industry and Changes in Customers and Technology

「In the United States, concerns over higher costs and the impact on supply and demand from tariff measures continued, increasing uncertainty about the outlook.」

「Automotive production and sales continued to recover in Japan against a backdrop of easing supply constraints, while sales by Japanese automakers in China remained weak due to the rise of local manufacturers. Regarding electrification, strategies including hybrids are being reviewed in the U.S. market, with automakers in Japan and overseas successively announcing delays or cancellations of development for certain models. Building a flexible production system and securing profitability are challenges. Concerns over the impact of tariffs on costs, supply and demand continued in the United States, increasing uncertainty about the outlook.」

「Regarding electrification, automakers in Japan and overseas have successively announced the postponement or suspension of development of certain models in the US market, including hybrid vehicles, prompting a review of their strategies. Building a flexible production structure and securing profitability are challenges. In the United States, concerns over the impact on costs and supply and demand from trade policies such as additional tariffs continued, increasing uncertainty about the outlook.」

「Automotive production and sales declined in exports to the United States due to the impact of tariffs, while the domestic market increased year on year as recovery progressed from shipment suspensions associated with the previous year's Noto Peninsula earthquake and certification irregularities. In China, sales by Japanese automakers remained sluggish due to the rapid growth of local manufacturers. In response to the EV shift under way in various countries, the Company is required to build a flexible production system including hybrid vehicles and secure profitability, while responding to U.S. tariff policy remains an important challenge.」

「Exports to the United States declined due to the impact of tariffs, while domestic production recovered from shipment suspensions following the previous year's Noto Peninsula earthquake and certification irregularities, resulting in year-on-year growth. In China, sales by Japanese automakers remained sluggish due to the rapid growth of local manufacturers. In response to the EV shift under way in various countries, the Company is required to build a flexible production system including hybrids and secure earnings, while responding to U.S. tariff policy remains an important challenge.」

「Automotive production and sales remained weak compared with the previous fiscal year, affected in Japan by shipment suspensions following the Noto Peninsula earthquake at the beginning of the year and certification irregularities at major automakers, and overseas by sluggish sales in China. Regarding the response to EVs, Western countries are also reviewing policies that had focused exclusively on EVs in favor of environmentally friendly vehicles including hybrids, making flexible responses to policy trends in each country and consumer needs a challenge.」

「Automotive production and sales increased exports due to higher demand for hybrids and the weaker yen. In Japan, however, shipments were suspended following the Noto Peninsula earthquake and certification irregularities at major automakers, while overseas sales were affected by sluggish sales in the Chinese market. As a result, global production and sales remained weak compared with the previous fiscal year.」

「Regarding the response to EVs, some Western governments have abolished subsidies and are reviewing policies that had focused exclusively on EVs in favor of broader environmental measures, including hybrids. Responding flexibly to policy trends in each country and consumer needs remains a challenge.」

「Automotive production and sales recovered in North America and Japan, where sales remained strong as production recovered due to improved supplies of semiconductors and other components. In China and Europe, however, sales by Japanese automakers, whose main products are gasoline-powered vehicles, remained sluggish due to the rapid expansion of EV demand and preferential measures by national governments. In addition to pursuing an early response to EV adoption to maintain market share, the Company faces the challenge of responding flexibly to future policy trends in each country and consumer needs.」

「Automotive production and sales have been recovering in North America and Japan due to improved supplies of semiconductors and other components. However, sluggish gasoline-powered vehicle sales resulting from the rapid acceleration of EV demand in China and Europe are concerns for the Japanese automotive industry. The global shift to EVs driven by regulations in various countries has become an established trend, and responding promptly to EV adoption to maintain market share is a key challenge.」

「Automotive production and sales have been recovering in North America and Japan compared with the previous year. However, stable supplies of semiconductors and other components, as well as sluggish gasoline-powered vehicle sales resulting from the rapid acceleration of demand for EVs in China and Europe, are concerns for the Japanese automotive industry. The global shift to EVs driven by regulations in various countries has become an established trend, and responding promptly to EV adoption to maintain market share is a key challenge.」

「Automotive production and sales have been recovering year on year in North America and Japan. However, intermittent shortages of semiconductors and other components, as well as sluggish sales of gasoline-powered vehicles resulting from the rapid shift to EVs in China and Europe, are concerns for the Japanese automotive industry. The global shift to EVs driven by regulations in various countries has become an established trend, and responding promptly to EV adoption to maintain market share is a key challenge.」

「To mitigate these risks, the Group is developing new products, identifying new businesses and expanding its product portfolio in areas outside the automotive industry, such as housing equipment.」

「The business of the Group is more than 90% dependent on the automotive industry. Although the Group does not belong to any particular automaker's group, trends in the automotive industry, the performance of customer companies, changes in customers' procurement policies and changes in existing components associated with automotive technological innovation may affect the Group's operating results and financial position.」

「In the North American market, demand for sedans, an area in which Japanese companies have traditionally been strong, declined, while demand for small trucks and SUVs increasingly grew. In addition, customers suspended production across the board from late March to late May due to the COVID-19 pandemic, and customer demand from June onward was uneven. As a result, net sales were ¥3,561 million (¥5,456 million in the same quarter of the previous year) and operating loss was ¥151 million (operating profit of ¥44 million in the same quarter of the previous year).」

「In the North American market, demand for sedans, an area in which Japanese companies have traditionally been strong, declined, while demand for small trucks and SUVs increasingly grew. In addition, customers suspended production across the board in late March due to the COVID-19 pandemic. As a result, net sales were ¥2,583 million (¥2,857 million in the same quarter of the previous year) and operating profit was ¥33 million (¥99 million in the same quarter of the previous year).」

「Variable costs increased as a result of changes in the product mix, including declining demand for the former core product, power steering hoses, and growing demand for the new IHX product, an internal heat exchanger for automotive air conditioners.」

「At the North American subsidiary, mass production of the new IHX product, an internal heat exchanger for automotive air conditioners, began, while demand for the former core product, power steering hoses, declined. As a result, net sales were ¥7,795 million (¥8,988 million in the same quarter of the previous year), and operating loss was ¥70 million (operating profit of ¥388 million in the same quarter of the previous year), due to lower contribution from the decline in sales, higher additional tariffs on materials from China and an increase in Mexico's minimum wage.」

「The North American market has remained firm, supported by strong corporate performance and stable employment. However, demand for sedans, an area in which Japanese companies have traditionally been strong, has declined, while demand for small trucks and SUVs has increasingly grown. At the North American subsidiary, mass production of the new IHX product, an internal heat exchanger, began, but demand for the former core product, power steering hoses, declined. As a result, net sales were ¥5,456 million (¥6,182 million in the same quarter of the previous year), while operating profit was ¥44 million (¥314 million in the same quarter of the previous year), due to higher import tariffs and an increase in Mexico's minimum wage.」

「The North American market has remained firm, supported by strong corporate performance and stable employment. However, demand for sedans, an area in which Japanese companies have traditionally been strong, has declined, while demand for small trucks and SUVs has increasingly grown. At the North American subsidiary, mass production of the new IHX product, an internal heat exchanger, began, but demand for the former core product, power steering hoses, declined. As a result, net sales were ¥2,857 million (¥3,142 million in the same quarter of the previous year) and operating profit was ¥99 million (¥137 million in the same quarter of the previous year).」

「The North American market remained firm against a backdrop of strong corporate performance and stable employment, but the trend toward lower demand for sedans, an area in which Japanese companies had traditionally been strong, and higher demand for light trucks and SUVs intensified. At the North American subsidiary, mass production of the new IHX (internal heat exchanger) product began in May, while lower demand for power steering hoses, previously a core product, resulted in revenue of ¥8,988 million (¥9,473 million in the same quarter of the previous year) and operating profit of ¥388 million (¥623 million in the same quarter of the previous year).」

「The impact of the transition in the product portfolio during Phase II, including the decline in power steering hoses due to vehicle electrification, is expected to reduce consolidated net sales by approximately ¥4.8 billion. These important issues must be addressed intensively.」

「The business of the Group is more than 90% dependent on the automotive industry. Although the Group does not belong to any particular automaker's group, trends in the automotive industry, the performance of customer companies, changes in customers' procurement policies and changes in existing components associated with automotive technological innovation may affect the Group's operating results and financial position.」