Nidec Bonds Streaming Wider: China EV Market Woes... Potential Impact On Europe

Nidec Corp (6594 JT), the USD23bn company which supplies motors to the EV industry, released results for 3M to Dec-23 after the Tokyo close this morning. These were fine at the headlines but included a meaningful downgrade to its EV business, due to China. Its Euro bond is one of the weakest performers in EuroIG index today (outside of CRE bonds).

• Headline revenues and EPS were actually marginally ahead of expectations. Mgmt also raised the revenue target for FY24 (to JPY2.3trn from 2.2trn) but cut net profit and EPS expectations.
• Most interestingly, the language around China’s EV market was fascinating: “an ocean of red” and “extremely fierce price competition”. As a result, the company is focussing more on its Stellantis JV, taking a restructuring charge and reviewing its China business.
• Our fear here is that this kind of disruption in domestic China is only likely to push BYD and SAIC, for example, to push harder for sales into Western markets. The FT ran a story on 4-Oct-23 noting that half the EVs exported from China are sold into Europe. With oversupply and fierce competition there, the risk is that contagion spreads into European auto markets.

Nidec’s EUR ’26 bond is streaming over 7bp wider (NIDEC 0.046 03/30/26) against a broadly flat EuroIG index.