▸ First half results
The environment surrounding the automobile industry has presented significantly different situations depending on the region. In Japan, domestic automobile production in the first half of FY2024 was down about 10% compared to the same period last year due to production suspensions caused by problems at major automakers and sluggish exports to Southeast Asia. In Asia, while Japanese automakers continue to experience sluggish sales in China, the transactions with our major customers in India are increasing in line with the growth of the automobile market in the country. We believe this trend will continue for some time. In North America, sales to major customers remain strong despite a swing away from BEVs (electric vehicles) to ICEs (internal combustion engines) and HEVs/PHEVs (hybrid vehicles/plug-in hybrid vehicles).
In terms of profitability, we continue to push ahead with cost structure reforms focusing on the break-even point. In Japan, we have implemented personnel optimization with an eye toward future prospects for the automobile market, and the benefits of this effort will become apparent in the forthcoming years. In China, we have returned to profitability through further optimization of our workforce and reduction in the burden of depreciation expenses, which was achieved last year as a result of the application of impairment accounting. In regions where transactions are increasing, we are promoting the establishment of an optimal global production system that makes effective use of the production capacity of each base, taking advantage of our business model that manufactures the same products globally. At factories in the U.S., although transactions are increasing, productivity has declined due to a rise in labor and other manufacturing costs and high labor turnover. This casts a significant shadow over profits. In order to rectify this situation, the entire company is working on strengthening on-site management to improve productivity as early as possible. In addition, we will continue to negotiate with customers to ensure that prices appropriately reflect rising energy costs and wages.
▸Management plan initiatives
As one of the pillars of our 2224 Medium-Term Management Plan, we have been working on “shortening product development lead times.” In this effort, we aim to halve lead times by promoting digital transformation and improving operational efficiency of each process, from order receipt to mass production. Not only does it enable us to keep up with the accelerating pace of new car development among automakers, but it also allows us to quickly respond to customer issues with existing products, leading to expanded business opportunities. It also reduces development costs and minimizes asset idleness.
In our manufacturing efforts as part of our cost structure reform, we are focusing on “value added per hour” and promoting improvements in productivity through the use of robots and the karakuri mechanism.
▸Trends in electrification and our response
We are developing an order strategy that is in line with the electrification share of each market. Moving forward, the automobile market is expected to see a plateau in BEV sales as demand from early adopters peaks. Meanwhile, sales of HEVs and PHEVs are currently expected to increase. As HEVs and PHEVs are equipped with both internal combustion engines and electric components, they use a large amount of aluminum die castings per vehicle. Accordingly, we expect an increase in demand for diecast products and growth in our business in the medium term. The Japanese market continues to be dominated by HEVs and PHEVs. While the market size remains flat, we are working to increase our appeal and strengthen our revenue base. Meanwhile, in India, which has grown into the world’s third largest automobile market, the proportion of electric vehicles is low compared to other regions. The market, however, is expected to continue to grow, centered on electric vehicles. In the second half of FY2024, we will start mass producing at domestic factories several new products to be installed on HEVs. At the end of December, construction of the second factory in India will be completed to strengthen the production system of parts for electric vehicles. The manufacturing line will be operational in 2025 for starting mass production of new products. Both domestic and global efforts are expected to contribute to profits. Furthermore, in Mexico, which is attracting attention as a near-shoring destination for the U.S. automobile market, we expect to see increased sales and profits as a growth driver region. However, we will be closely monitoring the impact of protectionist trade policies under the new U.S. administration to decide whether to allocate management resources there.
We apologize to all our stakeholders for any concern and inconvenience we may have caused. We will continue to strive to improve our corporate value, and we ask for your continued support.
President ＆CEO
Shinichi Takahashi
