Market Monitor- Focus on automotive performance - Japan

Market Monitor

  • Japan
  • Automotive/Transport

1st October 2015

Japanese automotive businesses´profit margins have generally improved, mainly due to higher sales in North America.

  • The Japanese automotive sector faces decreasing domestic sales due to the tax hikes implemented in recent years as well as structural issues such as a decrease in younger population. While overseas sales are negatively affected by the current slowdown in China, turnover is increasing in North America, helped by a weaker yen exchange rate.

 

  • Japanese automotive businesses´profit margins have generally improved, mainly due to higher sales in North America. However, global price competition is increasing for Japanese manufacturers, especially in the car parts segment.

 

  • Capital requirement is high in this sector, but in general Japanese automotive businesses are not overly indebted. Due to the satisfying business performance banks are generally willing to provide loans with good financing conditions, which is helped by low interest rates. Additionally, the Japanese government is encouraging banks to support companies with strong financing needs.

 

  • The average payment duration in the Japanese automotive industry is 30-60 days for car retailers and 60-90 days for wholesalers and manufacturers. Payment behaviour in this sector has been very good over the past two years. The number of protracted payments, non-payments and insolvency cases is very low, and it is expected that there will be no deterioration in the coming months as the businesses environment is expected to remain stable and banks are willing to lend.

 

  • Due to the generally benign indicators we assess the credit risk and business performance of the automotive sector as stable, and our underwriting stance continues to be very open for large manufacturers and open for car parts suppliers and wholesalers. However, in those latter segments we have adopted a more cautious approach for smaller business, which often have weaker financials than larger businesses and are more vulnerable to sudden changes in the market sentiment.

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