Toyota(US:TM)2025-09-26 02:32Summary of the Conference Call on the Autos/Auto Parts/Tire Sector Industry Overview - The conference call focused on the Autos, Auto Parts, and Tire sectors in Japan, highlighting the current market conditions and future outlooks for these industries [1][4]. Core Insights and Arguments Autos Sector - A bullish stance has been adopted due to the easing of tariffs and environmental regulations, which is expected to significantly improve the external environment for the sector [4][6]. - The gross tariff impact on seven major automakers is estimated at ¥1.6 trillion, with a net impact of ¥890 billion after recovery measures, based on a 15% tariff rate assumption under USMCA [11]. - Relaxation of regulations such as ACC-II, GHG, and CAFE is projected to reduce compliance costs by ¥1.2 trillion, surpassing the net tariff impact [11]. Auto Parts Sector - The ability to pass tariff costs onto OEMs is a key factor, with potential profit erosion of 20-30% for companies like Denso and Aisin [11]. - The sector is encouraged to explore value addition in vehicle intelligence and Software-Defined Vehicles (SDV) [11]. - The impact of tariffs is expected to be manageable for Toyota, but negotiations with overseas OEMs will be crucial [11]. Tire Sector - The impact of tariffs on the tire sector is considered relatively minor, but the competitive environment remains challenging [4][7]. - Localized production benefits are expected to be evaluated in the medium term, as tariffs increase the cost of cheaper imports, providing advantages to local manufacturers [7]. Stock Recommendations - The order of preference for subsectors is: 1) Autos → 2) Tires → 3) Auto Parts [5]. - Specific stock recommendations include: - Overweight: Toyota Motor, Suzuki Motor, Yamaha Motor, Denso, Aisin, Bridgestone - Neutral: Nissan Motor, Honda Motor, Mazda Motor, Subaru - Underweight: Subaru, Koito Manufacturing, TS Tech [10][12]. Additional Important Insights - The complexity of the Toyota Group structure is increasing, which may impact strategic decisions and operational efficiency [14]. - The global auto demand is expected to normalize post-COVID-19, with a projected growth of around 2% CAGR from 2024 [29]. - The US localization ratio for major automakers shows that Honda has a high ratio of about 70%, while Toyota, Subaru, and Nissan are slightly below 60% [69]. - The tariff exemption impact on operating profit over two years is significant, with Toyota's operating profit expected to be impacted by ¥744 billion due to tariffs [74]. This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state and future outlook of the Japanese automotive industry.