PREVIEW-Asia car makers set for rosy earnings on brisk demand

* Better-than-expected global demand helps in July-Sept

* Sales growth, cost cuts to outweigh Japan fx losses

* Hyundai on fast track with new products, won advantage

* Own-brand Chinese carmakers to suffer, JVs to surge

* Indian car makers to face margin pressure

By Chang-Ran Kim, Asia autos correspondent

TOKYO, Oct 25 (BestGrowthStock) – Asia’s top automakers including
Toyota Motor Corp (7203.T: ) and Hyundai Motor Co (005380.KS: )
will likely post big jumps in quarterly earnings thanks to
better-than-expected global car demand and further cost cuts.

Japanese car makers are hurting from a stronger yen (JPY=: )
but will likely manage big cost reductions and have enough of a
profit cushion from the first half to warrant an upward
revision to their conservative annual guidance, analysts said.

“Global auto demand was surprisingly good,” said Kurt
Sanger, auto analyst at Deutsche Securities in Tokyo. “There
were concerns that we would be flat to negative, but
July-September saw 4-5 percent global growth in a quarter that
people expected no growth.”

Vehicle sales exceeded expectations in Japan and the rest
of Asia, while they were in line in the United States and
Europe, Goldman Sachs analyst Kota Yuzawa said.

With higher raw materials costs not expected to fully hit
Japanese automakers until October, Toyota, Nissan Motor Co
(7201.T: ) and Honda Motor Co (7267.T: ) are seen reporting
operating profit growth of between 50 percent to 150 percent in
their second quarter.

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For TABLE on automaker estimates: [ID:nTOE60O03N]

Take a Look on Japan exporters and yen: [ID:nECONJP]

Take a look on global automakers [ID:nCARS1]

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Despite the dollar’s plunge to 15-year lows around 81 yen
— or 12-13 yen weaker than the average for July-September last
year — consensus forecasts for the full year to March 31 are
far higher than Japanese companies’ own guidance.

Among the top three Japanese automakers, analysts said
Toyota was in a relatively tough spot because it produces a
high 40 percent of its vehicles at home, exporting about half
of that.

If Toyota lowers its dollar rate assumption to 80 yen for
the October-March second half, from the current 90 yen, that
would translate into a forex loss of 150 billion yen. By
comparison, Honda built less than 30 percent of its cars in
Japan last month.

HYUNDAI POWERS AHEAD

South Korean carmaker Hyundai and its affiliate Kia Motors
(000270.KS: ) are also expected to report solid earnings for
their third quarter, driven by brisk sales of new models and as
they enjoy a price advantage over their Japanese rivals.

In contrast to the yen, the South Korean won (KRW=: ) stayed
at favourable levels, boosting profits of cars sold abroad.
Armed with a wide range of compact cars and improving brand
power, Hyundai and Kia continued to outperform in many markets.

“Market conditions are unfavourable to carmakers. But the
(relatively) poor performance of their rivals and their
strength in the compact car segment will benefit Korean
carmakers,” said Ahn Soo-woong, an analyst at LIG Investment &
Securities.

With sales momentum picking up, analysts said they expected
Hyundai and Kia, which together rank fifth in global car sales,
to report record earnings in the final quarter despite a
strengthening won.

CHINA MIXED, INDIA POSITIVE

In China, top-ranked SAIC Motor Corp (600104.SS: ) is
expected to report a more than 40 percent rise in net profit
thanks to solid demand for models made at its car ventures with
General Motors Co [GM.UL] and Volkswagen AG (VOWG_p.DE: ).

But those counting heavily on domestic brands to drive
sales, such as FAW Car (000800.SZ: ) and Chongqing Changan
Automobile Co (000625.SZ: ), are suffering.

“Whenever there is a market slowdown, those with
established brands always prevail. This is exactly what
happened in the past few months,” said Chen Liang, an analyst
with Huatai Securities.

FAW Car, part of major state automaker FAW Group which
makes the self-developed Besturn sedans, has warned of a fall
of up to 18 percent in its third-quarter earnings.
[ID:nTOE69D029] Changan Auto has estimated an 8 to 24 percent
fall.

Warren Buffett-backed BYD Co (1211.HK: ) is also expected to
post weak third-quarter earnings, having undershot its sales
forecasts. JPMorgan expects BYD’s per-share earnings for
July-September to fall 47 percent.

Indian car makers Maruti Suzuki India Ltd (MRTI.BO: ) and
Tata Motors Ltd (TAMO.BO: ) should report higher sales on robust
demand but could face a decline in profitability in coming
quarters due to a rise in raw material prices, analysts said.

“The question is not of demand but at what price point they
are getting customers,” Vineet Hetamasaria, a Mumbai-based
analyst at PINC Research, said regarding top brand Maruti.

“It’s a very competitive market, and they have not been
able to fully pass on cost increases.”

China’s SAIC will be among the first Asian automakers to
report July-September results, on Oct. 27.
(Additional reporting by Hyunjoo Jin in Seoul, Fang Yan in
Beijing, Prashant Mehra in Mumbai and Bharghavi Nagaraju in
Bangalore; Editing by Lincoln Feast)

PREVIEW-Asia car makers set for rosy earnings on brisk demand