Japan Automakers Brace Themselves for Profit Drop Amid Chip Shortage

Automakers worldwide have had to adjust or suspend production in the past few months due to a surge in demand for electronic devices, paired with US sanctions against Chinese technology firms leading to a chip shortage. 

Japan's largest automakers already report what analysts expect to be depressed earnings this week, while investors are trying to figure out the future impact of the global semiconductor shortage.

”The big question will be by how much automakers reduce earnings forecasts due to the slowdown in production and, consequently, lower sales. What should be an otherwise strong (post-pandemic) recovery year could be somewhat dampened by the supply predicament”, analyst Julie Boote at Pelham Smithers Associates commented.

For the year ended March 31, Toyota is set to report a 12.5% drop in operating profit at 2.1 trillion yen, according to analyst estimates. Profit is likely to rebound to 2.6 trillion yen in the current fiscal year started April 1.

Honda, in turn, is expected to see an 11% fall in profit at 560 billion yen, reaching a profit of 791 billion yen this year, while Nissan is forecasted to see a loss of 142 billion yen and swing to a profit of 141 billion yen.

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

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