Fluctuations in Domestic and Overseas Economic Conditions and Automotive Demand

「Although higher vehicle development sales, including dies, equipment and prototypes, and the impact of foreign exchange movements contributed to results for the fiscal year, revenue declined 1.7% from the previous fiscal year to ¥333,413 million due to lower production in the North America segment caused by semiconductor shortages, production stoppages in the Europe segment caused by a cyberattack on a business partner, production stoppages in the South America segment due to a natural disaster, and lower production in the China and Asia segments.」

「Against this backdrop, revenue for the interim consolidated accounting period declined 7.7% year on year to ¥154,510 million, reflecting production cuts across the core Japan, North America and China segments, as well as lower revenue from model development, including dies, equipment and prototypes, and foreign exchange movements.」

「Although increased production in the South America segment and higher vehicle development sales, including dies and prototypes, in the Japan, North America and Europe segments contributed to results for the fiscal year, revenue declined 1.6% from the previous fiscal year to ¥339,233 million due to the impact of lower production, mainly in the China segment.」

「Revenue　　Revenue declined due to the sharp decrease in production volumes. Operating loss　　Although labor costs were controlled and miscellaneous expenses reduced as production volumes declined, the impact of lower revenue was substantial, resulting in an operating loss.」

「In China, the impact of lower production volumes was substantial, with revenue totaling ¥71,476 million, down 6.6% from the previous fiscal year. Operating profit totaled ¥457 million, down 87.8% from the previous fiscal year, due to the impact of lower revenue and increased royalty expenses, in addition to one-off factors such as compensation recorded in the previous fiscal year.」

「In the automotive industry, the effects of sharp production fluctuations caused by the semiconductor supply disruptions that occurred in the previous year subsided, and global automobile production and sales volumes increased from the same period of the previous year. However, as the shift to EVs accelerates in China and Europe, there is also a view that Japanese OEMs are lagging in their response to vehicle electrification, and uncertainty about the outlook continues.」

「During the first 6 months of the fiscal year, the global economy continued to face concerns over an economic slowdown due to geopolitical risks, including the prolonged situation in Ukraine, and monetary tightening aimed at curbing inflation, mainly in Europe and the United States. In the automotive industry, global automobile production recovered as shortages of semiconductors and other components eased. However, in China, where the shift to EVs is advancing rapidly, sales by Japanese and European and U.S. automakers continued to be weak.」

「The pace of global economic recovery slowed as high inflation stemming from the post-COVID economic recovery continued, along with monetary tightening aimed at containing it. Uncertainty about the outlook continued amid the prolonged situation in Ukraine and persistently high energy and raw material prices. In the automotive industry, semiconductor supply constraints were gradually easing, and automakers that had been forced to cut production in the previous fiscal year successively increased production.」

「In the automotive industry, vehicle production fluctuated at the beginning of the period due to semiconductor supply constraints, lockdowns and other factors, but has been on a gradual recovery trend, although conditions differ among automakers.」

「In the automotive industry, supply chains were disrupted by semiconductor supply constraints, China's zero-COVID policy and other factors, forcing major fluctuations in vehicle production.」

「During the six-month period ended in the second quarter, tight labor supply and demand, and elevated resource and energy prices continued, mainly due to expansive fiscal and monetary policies adopted to address COVID-19, followed by demand outstripping supply and supply constraints as the economy recovered. In response, central banks in each country shifted to rapid monetary tightening. The dollar rose in foreign exchange markets, and the yen continued its historical weakening trend. Geopolitical risks, including the prolonged invasion of Ukraine, also increased, raising concerns about an economic downturn.」

「During the first quarter, resource and energy prices surged due to ultra-loose monetary policy during the COVID-19 pandemic, a rapid recovery from the pandemic that caused demand to outstrip supply, and supply constraints. The US Federal Reserve shifted to forceful monetary tightening, prioritizing inflation control. In addition, uncertain risks increased due to the prolonged invasion of Ukraine and China's economic slowdown.」

「During the fiscal year, the global economy recovered broadly due to COVID-19 vaccinations, fiscal support measures and other factors. However, uncertainty about the outlook continued due to the economic impact of the invasion of Ukraine and the reduction of US monetary easing to address inflation.」

「The automotive industry remains subject to production cuts due to the major impact of the global semiconductor shortage on vehicle production, although production is recovering as supply constraints have eased in some regions.」

「Compared with the same period of the previous year, vehicle sales in each country increased, and the Group's mass-production and non-mass-production sales also rose as production recovered from the COVID-19 pandemic. However, in addition to the semiconductor shortage that continued from the first quarter, difficulties in procuring components worsened as infections spread in Southeast Asia. Production cuts by automakers caused the Group's order-based production volume to fall substantially below the initial plan.」

「The automotive industry was affected by production cuts caused by the global semiconductor shortage, but vehicle sales in each country increased substantially compared with the same period of the previous year, when production was suspended and sales contracted due to the spread of COVID-19.」

「During the nine-month period ended in the third quarter, the global spread of COVID-19 restricted the movement of people and goods worldwide, causing economic activity to stagnate and become disrupted. The economy recovered from its bottom in the first quarter due to massive fiscal spending and monetary easing by governments, but activity restrictions were tightened again, mainly in Europe and the US, in response to the third wave of infections during October-December, slowing the recovery in employment.」

「Under these conditions, during the six-month period ended in the second quarter, mass-production sales of body and precision components declined in all regions except China. Sales of dies and equipment also declined because few new models were launched, resulting in revenue of ¥91,005 million, down 22.7% year on year.」

「During the three-month period ended in the first quarter, factories in all regional segments except China suspended operations due to COVID-19. Although production resumed sequentially, the impact of production cuts was substantial. In addition to lower mass-production sales, non-mass-production sales, including sales of dies and equipment, declined, resulting in revenue of ¥33,140 million, down 45.8% year on year.」

「Global vehicle sales fell below the previous year's level due to US-China trade friction and a slowdown in emerging markets. In addition, as the COVID-19 pandemic spread from January, factories suspended operations, beginning in China, followed by Europe and the US in late March.」

「During the nine-month period ended in the third quarter, although new orders expanded, mass-production sales declined due to lower customer production volumes and differences in model mix. In addition, sales of dies and equipment declined, resulting in revenue of ¥176,294 million, down 6.4% year on year.」

「Operating income was ¥1,636 million, down 5.1% year on year, mainly due to the impact of lower mass-production sales resulting from production cuts by customers.」

「The global economy during the first quarter was uncertain due to concerns that trade friction would intensify and persist as a result of the US's protectionist trade policies.」

「Overseas, economic conditions in the US, Europe, China and other Asian countries were relatively firm and generally on an expansionary trend, despite US protectionism, financial-market instability and geopolitical risks. In the automotive industry, mini-vehicle sales in Japan recovered, and production volumes increased on higher exports. Overseas, passenger-car sales in North America continued to decline, while China and India remained on an expansionary trend. In Europe, sales were strong due to high demand for SUVs.」

「Overseas, passenger-car sales in North America continued to decline, but light-truck sales were strong and the market remained firm. Conditions also remained relatively firm in China and emerging Asian markets. In Europe, strong demand for SUVs brought sales to their highest level in 10 years.」

「Overseas, vehicle sales in North America showed limited growth despite remaining at a high level, while markets in Asian countries, led by China, were generally on a growth trend.」

「In emerging markets, China's economic indicators remained at a high level, and the economies of emerging markets as a whole recovered gradually. In the automotive industry, North American sales volumes showed limited growth, affected by declines in passenger-car sales. In China, sales volumes grew steadily against a backdrop of rising demand for SUVs and other vehicles. In Japan, sales of registered vehicles continued to increase, while mini-vehicle sales also turned toward recovery, resulting in higher sales volumes.」

「Overseas, the economies of the US and Europe recovered gradually, driven by domestic demand. In Asia, the economy grew generally steadily, supported by firm domestic demand and a recovery in exports. In China, government economic stimulus measures provided support. In the automotive industry, demand for mini vehicles remained weak in Japan, while sales of registered vehicles increased and new-vehicle sales rose for the first time in 3 fiscal years. Sales in North America and Europe continued to grow steadily, while sales in China remained relatively strong due to tax reductions.」

「Overseas, economic sentiment in the US and Europe continued to improve. In Asia, domestic demand remained firm as employment and income conditions improved. China's current economic conditions have improved, but the outlook remains uncertain.」

「Overseas, economic conditions in the US, Europe and Asia remained firm, while signs of a slowdown emerged in China. Overall, the economy remained on a slowing trend, partly due to the effects of Brexit. In the automotive industry, vehicle sales in North America remained at a high level but showed limited growth, while sales in China and Asia were generally strong. In Japan, sales of mini vehicles continued to decline, and overall sales stagnated.」

「Following the result of the referendum held in the UK on 23 June, in which leaving the EU (Brexit) received the majority of votes, turbulence spread worldwide, financial markets became highly volatile, and uncertainty about the outlook increased rapidly.」

「Economic downturns in these markets and declining consumer purchasing power caused by trends in taxation, prices and other factors could lead to lower vehicle sales and affect the Group's business performance.」