Nissan will struggle to increase profits in the next business year if the yen remains at its strong levels, even if sales can be expanded, said chief operating officer Toshiyuki Shiga.
He told reporters at the APEC CEO summit at the weekend: “We’re still working on our projections for next year, but it would be very difficult to see profits continuing their rise with the dollar at JPY80.”
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The yen’s rise to 15-year highs against the dollar has put pressure on Nissan – facing increasing competition from South Korea’s carmakers – which have been helped by a relatively weak won currency.
Shiga said despite improved sales, Nissan’s profit margin was expected to more than halve to 3.4% in October-March, the second half of the current business year given the exchange rate assumption of JPY80 to the dollar versus JPY89 in the first half.
Nissan is already taking steps to offset currency losses, including procuring more components locally for vehicles built outside Japan and using more imported parts for cars produced in its home country.
To become more competitive, Shiga said Nissan wanted to boost the portion of imported parts for its Japan-made vehicles to around 40%. The current ratio for its small cars, which have the highest ratio of imported parts, is between 20%-29%, he said.
Shiga added he hoped the yen would start easing towards JPY90-JPY100 to the dollar towards the end of next year as the US economy recovers. “I think it would be difficult to see the yen falling during the first half of the year.”
He noted US vehicle sales were strong in October – the best monthly rate this year – and said he was encouraged by news of improving personal consumption in the world’s second-biggest auto market.
