Nissan Gains on Weak Yen as Strong Won Drags Down Hyundai

Nissan Motor Co. (7201) led Japanese automakers in reporting higher earnings as the weaker yen gave them an edge over South Korea’s Hyundai Motor Co. (005380), which posted a drop in profit for a third straight quarter.

Net income at Yokohama, Japan-based Nissan climbed 14 percent last quarter, increased 13 percent at Daihatsu Motor Co. and rose 49 percent at Suzuki Motor Corp. (7269)’s Indian unit, the companies reported yesterday. In Seoul, Kia Motor Corp. (000270) reported a 7.7 percent gain in quarterly profit. Hyundai Motor cut its full-year forecast for global industry vehicle sales after reporting a 1.9 percent profit decline.

The diverging fortunes illustrate how Japanese exporters are benefiting from Prime Minister Shinzo Abe’s economic policies, which have helped drive down the yen since late last year, and assisted automakers in absorbing slowing sales in China. Analysts estimate the Japanese currency, which gave Nissan room to cut car prices in the U.S., will probably weaken further this year.

“Hyundai is struggling in the global market due to the recent depreciation in the Japanese yen,” Masatoshi Nishimoto, a Tokyo-based analyst with IHS, said by phone today. The benefit of the cheaper yen may yet be curbed by lackluster sales in China and other key markets, he said.

Photographer: Tim Rue/Bloomberg

Worker Brad Canepa secures a Nissan Motor Co. vehicle onto a car carrier for dealer delivery at the Port of Los Angeles in Los Angeles, California, U.S. Nissan saw deliveries in the U.S. climb 20 percent last quarter after cutting prices on seven models, including its top-selling Altima sedan. Close

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Photographer: Tim Rue/Bloomberg

Worker Brad Canepa secures a Nissan Motor Co. vehicle onto a car carrier for dealer delivery at the Port of Los Angeles in Los Angeles, California, U.S. Nissan saw deliveries in the U.S. climb 20 percent last quarter after cutting prices on seven models, including its top-selling Altima sedan.

The yen has weakened 13 percent against the dollar this year and recently traded at 100 versus the greenback. The Japanese currency may weaken to 105 in the fourth quarter, according to the median of estimates compiled by Bloomberg.

The Korean won has gained more than 9 percent against the yen this year.

U.S. Deliveries

Nissan, Japan’s second-largest carmaker, saw deliveries in the U.S. climb 20 percent last quarter after cutting prices on seven models, including its top-selling Altima sedan.

The automaker has projected that a weaker yen will add 225 billion yen ($2.28 billion) to its operating income. Nissan based its forecasts for the current fiscal year on 95 yen to the dollar, while the yen traded at an average of 99 in the April-to-June quarter. Every one-yen decline boosts operating income by about 15 billion yen ($152 million), the company said in May.

The price cuts from Nissan were the first signs that a Japanese automaker was taking advantage of the weakening yen.

The discounting has put the rest of the industry on watch as a test for pricing discipline, John Krafcik, chief executive officer of Hyundai Motor’s U.S. unit, told reporters last month at an awards ceremony in Detroit.

Hyundai Motor yesterday said it expects competition with Japanese automakers to intensify as they step up incentives and discounts given the weaker yen. Its deliveries in the U.S. rose 1.9 percent, trailing the industry average of 8.5 percent, and sales slumped 7.2 percent in Europe.

Detroit Renaissance

Competition isn’t just coming from Japan. Ford Motor Co. (F) this week raised its full-year profit forecast as the Focus compact and Fusion sedan led a stable of more competitive products from resurgent U.S. automakers.

Hyundai cut its forecast for global industry vehicle sales this year by about 450,000 units to 79.4 million, led by shrinking demand in Europe amid the regional recession, Chief Financial Officer Lee Won Hee said yesterday.

The Korean automaker and Kia’s incentives surged 42 percent and 19 percent, respectively, in the U.S. last quarter on the weaker yen and lack of new models. This compares with a 5 percent decline in Toyota (7203)’s incentives and the market average of a 5 percent increase, according to Autodata.

Maruti Suzuki

At New Delhi-based Maruti Suzuki India Ltd. (MSIL), which is majority owned by Suzuki, profit rose to 6.32 billion rupees ($107 million) last quarter, exceeding analysts’ estimates. Maruti Suzuki, which sells the most number of cars in India, benefits from a weaker yen because it cheapens component purchases and royalty payments to its parent.

Japan’s three biggest automakers, Toyota Motor Corp., Nissan and Honda Motor Co., saw their combined sales in China fall for fourth consecutive quarter, as sales declined 4.9 percent from a year earlier last quarter, according to monthly figures released July 2. Individually, Nissan and Honda saw lower deliveries, although their drops narrowed, while Toyota posted a 0.6 percent gain.

The results illustrate how Japanese automakers continue to struggle to win back customers after a territorial dispute last year between China and Japan led to demonstrations at major cities across China. Toyota last year reported its first sales decline since at least 2002 and pushed back a plan to make the country its third million-unit market.

To contact the reporters on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net; Ma Jie in Tokyo at jma124@bloomberg.net; Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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