U.S. Auto Buying Surge Drives Japan Car-Parts Shipments: Freight

Sales of automobiles in the U.S., forecast to reach a seven-year high in 2014, are increasing demand for car parts by Toyota Motor Corp. (7203) and General Motors Co., in turn boosting air shipments from the world’s largest parts makers.

Automotive sales in the U.S. will probably rise 2.6 percent to 16 million this year, according to Credit Suisse, after reaching 15.6 million cars and light trucks last year, the most since 2007, according to researcher Autodata Corp. Hitachi Ltd. raised its profit forecast, citing higher sales in North America from its automotive-parts business.

U.S. auto-parts imports are helping increase cargo sales at ANA Holdings Inc. (9202), Japan’s biggest airline, which carries auto parts in the bellies of passenger planes flying to North America, and boosting profit at Denso Corp. (6902), the world’s biggest diversified auto-parts maker by sales. Denso, based in Kariya, Japan, and Aisin Seiki Co. (7259), the world’s third-largest auto-parts maker, supply parts to GM, Ford Motor Co. and Chrysler Group LLC parent Fiat SpA, as well as Toyota and Honda Motor Co.

“It still makes sense for some car parts to be made at the mother factory in Japan for economies of scale,” said Masahiro Akita, an analyst with Credit Suisse Group AG in Tokyo. “When parts run short, high-valued added ones can be flown by plane to satisfy extra demand.”

Denso’s net income surged 73 percent to 226 billion yen (S2.2 billion) for the nine months to Dec. 31 and the company raised its full-year profit forecast to 264 billion yen. Sales advanced 17 percent in the first nine months, paced by a 33 percent jump in North American sales, according to the company.

Sensors, Computers

The parts maker produces sensors, computers and electronics, as well as air conditioners and powertrains for cars, according to its website. Magna International Inc. (MG) is the world’s second-largest diversified auto-parts maker, followed by Aisin Seiki, also based in Kariya, according to data compiled by Bloomberg.

“The sales and operating income increased due to an increase in car production mainly in North America,” Kenichiro Ito, an executive director of Denso, said in a statement Feb. 3.

Motor vehicle parts exports by air from Japan jumped 20 percent last quarter, according to figures from Japan Customs, while sales of automobiles last year in the U.S., the biggest importer of car parts from Japan, surged to the most since 2007, according to the U.S. Department of Commerce.

Production Records

Toyota, the world’s largest automaker, reported a 7.4 percent increase in annual sales in the U.S. last year, while Honda said sales rose 7.2 percent. Both set production records at their North American auto-assembly plants last year.

U.S. automakers also sold more vehicles in the country last year. GM’s sales were up 7.3 percent, Ford’s rose 10 percent and Chrysler added 9 percent compared with a year earlier. Total sales of vehicles in the U.S. increased 7.6 percent.

“The general policy is for Toyota to send parts by ship, but if it’s an emergency we will consider flying the parts,” said Dion Corbett, a Tokyo-based spokesman for Toyota. He declined to say what share of parts is sourced from Japan.

Tokyo-based Hitachi is also benefiting from increased demand for auto parts in the U.S. Japan’s second-largest manufacturer by employees on Feb. 4 raised its profit forecast for the year ending March 31 to 215 billion yen, compared with an earlier projection of 210 billion yen.

Cold Snap

A slowdown in the growth of U.S. car sales in recent months as cold weather kept buyers from dealer lots hasn’t changed Credit Suisse’s forecast of 16 million units this year.

U.S. vehicles sold at a 15.2 million annualized rate in January, compared with estimates for 15.7 million, according to a Bloomberg survey. There were an annualized 15.4 million sold in December, compared with a prediction for 15.8 million.

The rate of growth in the world’s largest economy will accelerate to 2.8 percent this year from 1.9 percent last year, according to the median estimate of 83 economists in a Bloomberg News survey.

“Sales are solid in the U.S.,” Credit Suisse’s Akita said. “The impact from the economic rebound is a big reason for that.”

The U.S. is the biggest importer of car parts from Japan, with 21 billion yen of purchases in 2013, according to figures from Japan Customs. China is the second-largest buyer, with 12.5 billion yen, and Thailand third with 6 billion yen.

Air Freight

Japan’s exports of motor vehicle parts by air last quarter jumped to 22 billion yen, from 18.3 billion yen a year earlier, according to Japan Customs.

“The U.S. had a very good year for sales,” Hiroshi Ataka, a Tokyo-based auto-parts analyst at IHS Automotive, said by telephone. “The carmakers must have been faced with higher sales than they expected, and needed to fly in parts to fill the gap.”

The Asia-Pacific region had back-to-back increases in air freight in November for the first time since February 2011, with volumes up 4.8 percent compared with a year earlier, according to figures from the International Air Transport Association.

Cargo carried by air will increase 3 percent this year, by volume, compared with a 1 percent rise last year, according to predictions from freight forwarder DSV A/S. (DSV)

The drop in the yen against the dollar is also helping increase demand for car parts from Japan, according to Kiyoshi Tonomoto, an executive vice president at Tokyo-based airline ANA.

The yen averaged 100.48 against the dollar last quarter, a 19 percent drop from a year earlier when it averaged 81.25, according to data compiled by Bloomberg.

‘Very Active’

ANA’s international cargo shipments rose 21 percent to 77.6 billion yen in the three months ended Dec. 31, from 64 billion yen a year earlier, according to company figures.

“The cheaper yen is helping make the automobile parts business very active,” said ANA’s Tonomoto.

The extra demand for auto-parts shipments has yet to affect freight rates at ANA. The carrier charges 1,030 yen a kilogram for shipments of more than 1,000 kilograms (2,200 pounds) to Chicago from Tokyo’s Narita airport, and the price hasn’t changed for several years, said Maho Ito, a Tokyo-based spokeswoman for ANA.

“In the medium- to long-term more and more parts will be made locally, but in the short-term that means parts have to be flown in to make up shortages,” Credit Suisse’s Akita said.

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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