Now, we would like to start the presentation on Nidec Corporation's financial results of the third quarter of fiscal year 2023. First, please make sure to turn off your mobile phone or switch it to silent mode. Thank you. Presenting the company's financial results are as follows: Mr. Shigenobu Nagamori, Representative Director, Chairman, and CEO. Mr. Hiroshi Kobe, Representative Director, President, and COO. Mr. Mitsuya Kishida, Executive Vice President and Executive GM of Nidec's Automotive or AMEC Business Unit. Mr. Akinobu Samura, Senior Vice President and CFO. And Mr. Teruaki Urano, General Manager of IR Department. That is all. In today's presentation, these executives representing Nidec Corporation will provide you with an outlook and the details of the company's financial results for the third quarter of fiscal 2023. Then, the floor will be open for questions.
If you have any questions on the presentation, please kindly wait until then. This presentation will be over by 6 P.M. Thank you. Now, Mr. Samura give you a presentation on his part. Mr. Samura, please.
This is Samura speaking. I'm the CFO of Nidec Corporation. I'd like to give an update, outline of financial results of our company. Please turn to slide 3. These are the 3 major points that I have to cover in my presentation here. First of all, our company has been operating smoothly as planned. In all of these topics, as you can see here, we are standing at the record high results. Secondly, when it comes to EV traction motor business, as you may already know, we are currently revising our strategy to be more profit-oriented for our future.
In this quarter four, we are going to be focused on strengthening our financial capabilities. JPY 45 billion or so will be recorded for the restructuring plan of this business unit, and the details are shown on slide 12. Sales have been updated upward, approximately JPY 100 million, and operating profit has been revised downward to JPY 180 billion or so. Given the based on the financial status and other relevant factors, the dividend has been increased by JPY 5 to JPY 40, making the projected aggregate annual distribute to JPY 75 per share. The other main points, I would like to give you further details. Please turn to slide 4. This chart shows our cumulative results. On an annual basis, sales have increased 3.2% to JPY 1,754,688 million.
Operating profit grew 36.1% to JPY 169,321 million. Operating profit ratio was 9.6%. Profit attributable to owners of the parent increased 40.2%, JPY 145,918 million, which is a significant increase. All of these are record high results. Please turn to Slide 5. These are the results, a product group overview. First of all, left top side, here, small precision motors. We have significantly reduced the fixed cost, and we tried to revise the price strategies for deficit-generating models. And after being hit the bottom, after hit the bottom in the quarter for our last fiscal year, we have continued to have a very good performance. Next, automotive products.
On a global basis, the sales are on a recovery track, and by capturing this growing demand, we have increased the sales and increased operating profit. Next, appliance, commercial, industrial products. We have operating profit ratio of over 10%, as you can see. We are continuing this trend. When it comes to machinery, we have the semiconductor testers and other major models. We have hit the bottom in third quarter, and in quarter two, we have some one-time related factors. Because of that, we have decreased sales and operating profit. Please turn to slide 6. This is our cash flow over the past three fiscal years. Operating profit levels has increased, and cash flow has improved as well. And as you can see, the results are one of the top highest levels ever.
We continue to improve our operating profitability for our future growth. Please turn to slide 7. This is about EV traction motor. This is our profitability, a recovery plan for the business unit. We identified areas of responsibility, areas of growth and improvement, especially in the Chinese market. CDQ market is something you can describe this market as. We are going to intensify our efforts on the localization of the production of our products, and when it comes to NPE, which is a joint venture with our foreign company, we are going to make necessary efforts for that for our future growth in this area as well. You can see on this slide 8, we have NPE, our joint venture.
The growing number of cars are equipped with our E-Axle units, and this business will be consolidated into our group from next fiscal year. Next, slide nine. We're going to launch businesses in India and in Africa, and in a growing basis. We have four existing factories in India, and we have a fifth one under construction. When it comes to Africa, this is going to be our first business case to have a factory established in Egypt. And we're going to start operation in this factory in Egypt in the future. These are the basic outlook of our performance, business performance. Thank you. Thank you very much. Now, we would like to have a question and answer session.
If you have any questions, please make sure to use your microphone, and please raise your hand first to make a question. If you have any questions, please let me know. That person sitting in the front row, in the middle.
Thank you very much. This is Takayama of Goldman Sachs. I have three questions. I'd like to give you questions one by one. First of all, if you go to slide seven, Traction Motor's future plan. If you add this number, 1,371, which is -41, that's your recovery plan. In the midterm presentation, when you talk about the Stellantis, it was a OP rate of 78%. How do you explain the change between then and now?
When it comes to AMEC business unit, and you said that you're not going to sell any deficit-generating models, but if you take a look at the first half of next fiscal year, the deficit is continued to exist. Please explain that as well. Thank you.
This is Kishida speaking. I'd like to explain this to you as the representative of AMEC business unit. First of all, when it comes to fiscal 2024, as Mr. Samura has already explained to you, we're not going to be optimistic about our future anymore. When it comes to establishing next year's business plan, our focus is now on all these business opportunities that we are definitely confident about making come true.
When it comes to AMEC business unit, we are going to have some big deficit in the next fiscal year. But when it comes to operation Traction Motor business, we are going to hit and possibly going above the break-even point, according to our current business plan. When it comes to this yellow portion, NPE's production volume, which is part of our production plan. Our annual plan was 1 million units per year. Especially in Europe, the auto market itself is undergoing dramatic changes currently. It's not just EV products only. 680,000 units are what we are thinking of. This is based on a total number of production mix of our European customers.
When it comes to sales forecast, 1, JPY 10 billion, JPY 20 billion, and JPY 30 billion, et cetera, is part of our growth plan. Throughout the year, this ratio is set to be 7%, according to our previous explanation. In the second half of the next fiscal year, we're going, expected to reach, hit the target in the second half of the fiscal, next fiscal year. That's our plan. At any rate, these are all conservative figures on a quarterly basis. These are numbers we must hit as we try to aim for further growth in the future, as a part of our Nidec's DNA, so to speak. Thank you very much.
My second question is as follows: On the group-wide basis, I'd like to Mr.
Nagamori or Mr. Samura, answer my question, the second question. I believe there are some uncertainties, I believe, but when the recovery of the traction motor business is JPY -139, and you rapidly going again to the positive territory based on the contribution by Stellantis, that's my, that's the image that I have in my mind. 2,500 or even 3,000, are you going to achieve those figures? But these are the conservative numbers, but I believe other business will be able to make up for this type of a struggle. Now, what is your plan for the next fiscal year and onward? Can you give me the future plan?
First of all, I would like to look back the past, the lesson that we have learned when it comes to this business. I would like to explain to you what happened in China. We launched the Gen 1 first, and we expected certain amount of deficit, and our calculation was correct. But when it comes to Gen 2 and after that, prices decreased significantly. There was a large gap between those actual figures and our expectations. I have been running the company over the past 50 years, whether it be our customers, our competitors, and our service are all in deficit. This is the first time for us to have this kind of experience after all these years. It's a typical red ocean environment. We're not really sure the basis of the price to be decided.
This is not an excuse or anything, but say there are 10 companies, 10 competitors in the market, and the other companies are making profit. And if we are not making a profit, and that net, the profit in that case, the responsibility is on our side. We all analyze and understand our competitors' products. We know competitors' component prices, et cetera. And given those results of the analysis, we know that they are in a deficit. We are not actually, technologically, in disadvantaged positions. We are truly superior to them in terms of quality, et cetera. They are... Their products are really cheap. Up until a certain point, we had Gen 2 after Gen 1, and we are going to have - we were going to have Gen 1, followed by Gen 2 and a Gen 3.
However, despite this plan, the more we made, the more deficit we were in, and so were our competitors and customers. That's not the type of environment I, we believe we should be in. We should be able to generate healthy profit. So we decided to decline the orders. We had the Stellantis, whose prices are promising, and Stellantis can bring us to be able to generate the operating profit of a 15% or more even in the future. This is our joint venture with our customer, so quantities are guaranteed. There's a mutual guarantee between us and Stellantis. I cannot give you a name at this moment, but we have some inquiries from our domestic customers in Japan, and demands are increasing.
Inquiries are coming in large numbers, starting with 8%-10% in operating profit ratio. Therefore, that's how I would like to start our business.
So this impairment that isn't really anyone's fault, you know? So, but, even the machine that we're able to still use, we need to impair it at this point in time, because we don't want to combine it with something that is completely unprofitable, and we don't want to start off with that. So that is why, JPY 45 billion, in these are the facilities and also inventories as well. And, it's, but it's possible that we may be able to use some of these, so that is why we're writing it off. So I believe that, the way we do this, this way, is not wrong. It's... I think it's maybe BYD and Tesla, they are profitable, but most of everyone else is loss-making, but they're receiving enormous amount of subsidies to do this.
So that's why Tesla is now beginning to lower the prices. So in the beginning, it was like 10%, and now it's like in the single-digit %, and they're lowering the prices furthermore. So the OEMs are now entering this market now, and they're all loss-making, and they can't exit, so that is why they will continue. But we're components manufacturer, and for us to be in that competitive ground is not necessarily good, sound management. So as Kishida just explained, we want to be very disciplined here. And I don't want to blame anyone for this. So the way maybe we purchased the equipment, facilities, maybe we bought something that was expensive, but I'm the CEO, so I'm responsible for that.
So the top management has changed this time, and most of the people who were in charge, I will be announcing the personal affairs later on, but, basically, we are completely renewing the management. So most of the people who were in the company from before are continuing on, and people who have come join in between as a mid-career are no longer in the company anymore. So Nidec, you know, itself will continue to do the R&D and production. Even from the design stage, if we use as this kind of parts, we will not be profitable.
Nidec is very strict and disciplined about that, but someone who comes from the outside of the company, mid-careers, you know, they are not concerned about that, and they continue to spy, and then they go and take orders even if it's unprofitable. So that was not very successful. So the relationship with Stellantis isn't like that. We are partners, our partners, Stellantis, also need to make monies, and I think, I believe that they are trying to, and we have the Japanese company as well. And, you know, we have the Japanese. Stellantis have never done this before, but the Japanese OEMs are making on their own. So, what about the cost difference? I think, I think they are now beginning to understand that.
So I don't think they will do a reckless price cut. As a result, Chinese customers, I think, are quite abnormal. Maybe they were about 200 companies, and they're all going bankrupt, one after another. And if you go to China, you can see all these different cars that no longer the OEMs are existent. So the pricing is not appropriate. So we will continue to see companies fail, and only healthy companies will remain and survive. So we will begin to see more Japanese players, we will see Western players as well, so it's a comparison with them.
So I was wondering why we were able to sell this product at this price, but because it's in such a price war right now, so we would ask those cheap players to stay out of the market for a while. And Nidec, you know, we are a company that is very much disciplined. So as I have been saying, if other companies are making money, it's—we won't be the only one that's not making money. That would not be the case. Here, we don't want to sell something of a completely different quality at the same price. So we want to be the first in the market, and we had, you know, there's 800,000 cars in the markets in China, so that is why we started.
But the pricing is completely different now, today, than it was initially when we entered the market. So as Kishida explained, we will basically redo look at the pricing and everything else, and it's being looked at and overseen by Nidec proper employees. So we are make sure that we don't want to repeat the mistake we did before. So then this EV traction motor business is, you can expect maybe JPY 10 billion in improvement. So you started with 220, and you know, you have this improvement here, and you want to improve it on an overall basis, right? So this is quite solid, a forecast or plan. So next year, the profitability, we have to do JPY 250 billion, I, I think.
AMEC, even if you take that alone, and if you look at auto businesses alone, the existing business, like the brake motor, you know, that we have been doing from before, continues to perform strongly. And as you can see from the financial results, this time, everything else are generating JPY 10 billion in profit. And if you do a simple math, you know, that's JPY 40 billion per year. So... And, you know, basically, traction motor losses were basically taking away, eating away the profits, so we will be able to eliminate that. So next step will be the JPY 300 billion. We're about two years behind, but we have to do JPY 300 billion-JPY 350 billion. And even then, we're about three years behind.
So if you look at each of the businesses, you will see that even the precision motors, they're introducing new products, and they're coming back at a high speed and very profitable. Even ACIM, MOEN as well, overseas, they are introducing many growth products as well. So I believe that this will be another 15% or so. I think they've. That's pretty quite firm. So this is a very solid foundation-based business, also long term as well. So we have this old, you know, pumps, and, you know, they need to be replaced. So for example, you know, Hitachi is saying 3-5 years, but we can probably expect long-term, solid orders coming in in the next few years.
We have this new machinery business of there's already four, you know, companies that were all making losses were now turning it around. Now, we had a strong semiconductor business growth, which was actually down slightly, but then this is expected to recover next year again. So I think this number is not impossible to achieve. So if you look at the detailed numbers, you will be able to tell. If something goes wrong, it may be whatever we were dependent in terms of semiconductor, maybe that's a little bit of a uncertain, but I think that we are basing our businesses on solid foundation. So the greatest issue it would be, the problem is traction motor, as we have been talking, because they are already in the red, and so we have to stop that losses.
We, you know, that in itself, it makes about JPY 30 billion-JPY 40 billion in difference. So that is slightly different from our initial plan. Not in line, but we know this already, the cost. So all we need to do is just correct that and go back to the original Nidec, where we were before. Another point is that next month we have succession products, which we will be announcing, and we've also have a big shuffle of personnel, as I have said earlier. We, you know, the people who joined the company as new graduates are now, you know, 40 and 50 years old, and, you know, they have really grown.
We were, you know, hiring a lot of mid-careers before, we made mistakes, so now we're trying to grow people from internally, and they know they are hard workers. We are finally beginning to see that. I think in the last five years, we had too many people coming from outside, and I think we were not very aligned in terms of our vector. We were overspending in expenses, so that has been corrected. You know, that will be very different from the past management. Last question, very briefly. So, you know, climbing a mountain, maybe E-Axle isn't exactly the key, so maybe you need to do M&A. What about that? Sure, we are planning to do big M&A in the future. I will be stepping down, and what would I do instead?
I will be looking at M&As. So actual operation will be handed over to the new management. M&A, I was looking at so, so large size. Our company, you know, we are a motor-dedicated player, and we're expanding a little bit, but we want to go back to our origin, especially going forward. Large motors have solid growth prospects, so we want to enter into that market, covering from small motors to large motors. So we want the motor business to be the core, the pillar of our business. I think our axis or our pillar has been shifted a little bit more towards auto, but we want to go back to the motors.
We're already number one in the world in motors, so we want to make sure that the pillar is bigger and solid, and that leads to solid management, stability, and profitability. So this is very basic, and we don't want to expand ourselves too much, 'cause that's probably not good. That big pillar is motor, and we are good at motor, and we're most profitable in motors. So this is where management resources need to be concentrated, and the related areas, peripherals, will expand. So rather than to go and instead advancing to areas that's completely unknown to us, we will be where we were. We were a little bit too focused on traction motor, and this is because someone from Abbott Korea was covering it. So that is why we want to.
These members are now retiring, are heading towards that direction. So we have new people, who are excellent talents, and, you know, they are with us for a long year, time, and so we, they will be taking over.
People need to understand the rhythm and the policy and the philosophies. These people are what we need as a company. You know, people from the outside tend to bring in some foreign elements into our company, and that's not really good. We're not going back to that type of situation. Thank you very much for your explanation. Any other questions from anyone in the audience? That person, that's the person in the third row from the front.
This is Nagai of TV Tokyo. I'm Nagai of TV Tokyo Broadcasting Corporation. I'd like to give you two questions here. You talked about the importance of people who join the company right after graduating from college, yet the current one of the hot topics is wage increase.
What is your policy for the business wage increase? I'd like to increase the basic wage by 15%, and on a company-wide basis, we're going to give a 5% increase. In 2020, I promised to the people of our company that we're going to increase the amount of sales level by 20% on a global group-wide basis. And if what I said is going to take place, our color collection is going to be correct. We have Murata Manufacturing and Kyocera Corporation; we're going to hit their levels when it comes to wage level or salary level. You talked about EV traction motor business a few minutes ago.
It's not just EV, but when it comes to the market of China as a whole, how do you see the immediate situation? The Chinese National Bank has announced a downward revision. What is your economic perspective of China? I believe overall, China, Chinese economic situation is not really good. I'm not really thinking of which one is particularly good, et cetera, but we are in a very broad range of business in China. We have had some struggle in traction motor business, but other motors, regular motors, are doing very good in China. But the growth pace has somehow stagnated right now, compared with the past. We're currently having some shifts toward India as well as Africa.
We need to check the future potential growth of individual countries and regions that are going to affect our growth as well as a company. In home appliances, air conditioners, for example, we are doing very good in these businesses, washing machines also. We're going to enter into the market, bikes, for example, and other these products are going to grow. India has a future potential, and Africa has a very good future potential for the next 10-15 years. Just like 20 years ago, we entered into the Chinese market based on possible future growth perspective. And being in such a growing countries and regions are going to affect us positively. When it comes to machine tools, the business is going to grow significantly in India going forward.
Well, overseas markets outside of Japan are doing very good, robots, machine tools, et cetera. Domestically speaking, competitiveness is being lost in many respects, many areas. In China, you really cannot see when and how you are going to be able to hit the bottom when it comes to pricing. We like to select politically stable countries. That's the very basis of our business. We're not going to be going into any business, you know, just to lose our money, and we're not going to do that. In that regard, I believe you said that motors, other motors are really fine in China, but when it comes to other industries, the moment has been lost in some or so.
We have been enjoying a very high level of shares in the market, 70%, for example, when it comes to some of our products. These successful products are not really affected negatively in the situation in China, but we're not losing market shares there. Product quality is very important as far as we are concerned, when it comes to posturing, brake-related products. It's not something you can purchase just because they are inexpensive. Our profitability is very high in these, when it comes to these products, whether it be home appliances and other products. In some countries, expensive products are liked. It's not just about when it comes to washing, vacuum cleaners.
Our rotating revolution is, you know, should be as high as 100-20,000 per minute, but some countries cannot really deserve to, cannot really make that type of expensive, high-performance products. That's why we are going into these markets to make such products. But we are not going to set our price too low or accessibly low. But many people are interested in traction motors, so we did what we could do, but we're not going to lose any more profit or money. When it comes to immediate situation in China, in traction motor and other, do you have any actions to take? We are thinking of that. We are currently developing products that we, with which we can win in the Chinese market, technologically speaking, and we're not going to be focused on price too much.
We have quite a few OEM manufacturers. These manufacturers are launching EVs, and we're now at the stage where we can make comparison among these products. That way, Japanese manufacturers, too, can be evaluated when it comes to their products. Performance is very important when it comes to the selection of the products. Based on that, we should set the prices. We, that all the products have costs, and the cost should be the very base of our calculations of profitability. Well, thank you very much. Any other questions? People, the person over there, the second person in a row. Second row, please.
It is Akizuki of Nomura Securities. I have three questions. First of all, automotive business... Other than traction motor business, what is the situation of non-traction motor business? That's my first question.
I'd like to give you an answer for that. This is Kishida speaking. As I've touched upon lightly a few minutes ago, we have this organic mode, organic businesses, which does not include traction motor business. These businesses are going smoothly, steadily. Brake motors, power steering motor business. In addition to these products, we have some control units attached to these products as a system. That's the type of proposals we are making in growing numbers. We used to have more than 50% market share, and we have a very good relationship of trust with our customers. In these areas, we are making more than JPY 10 billion worth of profit per quarter.
And one more thing, when it comes to traction with them, is when you go back to slide seven, you can see the middle section of the right-hand side. This is one of the new areas we are in, NPE and other businesses. We have some growth supporting businesses indicated here. China Traction Motor Business, there, in this business, we are making more than 800,000 units for our customers. Stators and other components are what we are going to produce on a group-wide basis for our European and other countries' customers. That's what we are going to do from the second half of the 2024 fiscal year. In order to do that, we're not yet to receive any finalized orders, but we are required in having some inquiries. Over the past 50 years, Nidec has been in this motor business.
We have a true capabilities. When it comes to traction motor, used to be one of the very promised areas, but we are going back to the very basics, very original, so that we can regrow further. Then that's the type of phase we are going into in the 2024 fiscal year and thereafter. Thank you very much. My—here's my second question. This is something that I would like to ask Mr. Nagamori. In the this consolidated business report, the motors profitability recovery, this is something that I've not, that I'm not used to seeing in a report issued by Nidec. What, what is your plan for... What strategy for your motors? Small precision motors. Well, the new products are coming up very soon. Large motors are coming up as part of our business product portfolio.
Motors for electric e-bikes. Our products are in many of our customers' products. These products are all competitive. These competitive products will grow in business in the future. In general, motors in the home appliances area, we are having very, some of the very good, highly competitive products available for our customers. The ones for vacuum cleaners, robots, et cetera. We are utilizing very new, cutting-edge technologies for these products. These products used to be in a struggle once, but we are currently debuting some brand-new products in this market. This is a part of our restructuring strategy, restructuring effort. Being young means that you can work hard, we never give up until we win in the market. We're not really thinking great, we're not really focused on life, work balance, et cetera.
By saying this, I could be subject to criticism by many people, but young people themselves are trying to work hard rather than being focused on a work-life balance. Unless you're number one, you're same as being, being the last. You know, you have to be first to be in the market, you have to first product, produce, make the product in the market. You know, small precision motor is the original business that we started as a company. We must not be beaten by our competitors in this business. Almost all of our engineers in this area, this is a Nagamori group, so to speak, of engineers in this, SPMS business group. I'm sure that they are going to regain the very high competitiveness.
Just like we worked very hard and achieved great success 20 years ago. Thank you very much. Here's my third question. This is a very small question. Very simple question. I believe Mr. Samura can answer this question. The tax ratio has increased a little bit. What is your plan for the tax ratio for the next fiscal year? We have had this expectation on a little higher tax ratio. We need to streamline our AV business. In this process, we are thinking of effects by the tax ratio. Secondly, as far as Nidec is concerned, we are making profit as a Nidec group. There is a limited amount of profit as Nidec Corporation. You know that to secure the original amount of money, base money, for a dividend, we need to secure JPY 100 billion or so.
For that, we need to think about tax-related effects. That's what we need to think, keep in mind constantly. That's how we like to do our tax management. I believe you have already understand what Mr. Samura said, but we have made a profit in Thailand, in China, et cetera, and other countries overseas. But we have to pay 10% tax in Japan. We like to make investment locally, so we have left some of our money in these places, countries. But still, by paying this money, we would like to pay this money so that we can secure profit in Japan. That way, in Japan, the effective tax ratio is probably going to increase. That's our expectations. Thank you. Any other questions?
Thank you for the explanation. Mike Dorfan, Citigroup Securities. I have two questions. First question, I have some questions about the number, your traction motors, the way the profit will be generated next year. I'm looking at page 7, between Q3, Q4, your profit growth is larger or greater than sales growth. What is the change that can we expect here? And also in the following year, in FY 2025, is Q4 would that be the basis? Those are my two questions. Let me first of all answer that question. Q3, Q4, in particular, Q4, including profitability, the reason why we are improving. I think that's the intention of your question.
As we have been saying from before, Gen 3 will be online from the latter half of Q2, and the contribution rate will increase. With regards to Gen 1, we are applying a very strict order-taking constraints. Whatever is unprofitable, we will not take any orders. So we will continue to do that with the Gen 1, and then and we will be able to increase the contribution or ratio of Gen 3, and also we will take orders from highly profitable customers, especially Japanese OEMs in Japan. So that will be added on in Q3, Q4. Also, improvements towards NPE. So, this is improvement in output and productivity. Those will also contribute as well. So, in our daily effort, we will make sure that this effort was accelerated.
But with Q3, we will finally be able... Q4, excuse me, we will finally be able to reap our efforts. 2025 onward, it's really about how can we continue this effort. So that will be our perspective. That is all from us. Thank you. As a follow-up question, so you have Gen 3 and X3-1. So the product development status is in line with the plan? Yes. With regards to Gen 3, in terms of progress rate of development, it is in line, on schedule. However, we want to be profitable, have solid profit generated. And we want to be very selective on our materials and to produce the product.
Rather than to acquire many, you know, number of customers, we want to focus on, providing to Guangzhou Automobile Group, GAG, which is our, customer joint venture partner. So in terms of progress, it will be more solid, at least this revised version is much more solid, in terms of progress rate than compared to before. So development is in line. If I may add... So with regards to the traction motor business, I know that we have lost confidence temporarily. I know that many people feel like you can't trust us anymore, feel confident about this business anymore. So in the past, you know, we're not, unlike the past, where we can't be, hard on the adults anymore. So you know what? If you're hard on us, I will, be hard on you five times more when we recover.
But, you know, I can't talk about the numbers right now, but maybe it will be better to speak about this more, once we're able to achieve the track record on this, have an outcome. You realize I'm very quiet today, right? Because I want to be. I think numbers speak more than anything else, so. But I think all the responsibility on us. So, for example, Gen 1 and Gen 2, just to give you an example, against the selling price, I'm very concerned about a material ratio. And, if it's 50%, then you can get 15% in profit. However, whether it's small or large motor, a large motor, it doesn't make much difference.
But the previous CEO was trying to get 95% in this material ratio, and it can't be profitable with that. This is where we are trying to be very disciplined. We have a lot of people, so we need to probably reduce the headcounts and then improve our material ratio, then we should be able to achieve profitability of 15%, for sure. But, you know, we talk about inverters, but that's just an excuse, just a justification. Even if we're not profitable with the inverters, you know, if we can improve the ratio of motors, material ratio by 5%-50%, then we should be able to get the numbers. So we need to look at the design stage as well, rather than to use expensive, outsourced components. Maybe we can produce it in-house.
So rather than to purchase from outside, I think we need to make it in-house. We used to do that, you know, this is very basics of management. I mean, if you try to purchase from the outside, this is an amateur. So this is something we're already doing this, so, you know, if we're not at 50%, then we will not sell it anymore. And these initiatives are being taken by people who have been in the company since the new grads. They know the business really well. And we are, you know, trying to eliminate people from or reduce number of headcounts in the interactive divisions as well. So, you know, you go, you know, people who are going traveling overseas for business and drinking expensive wine, we don't have any of those people anymore.
Should expect a significant improvement in performance. I have been doing this business for 50 years, and it was a big lessons learned for me. So I will be much louder next time, but I'm holding back right now. Thank you. So I have one more question. Focus of investment, where would that be for you going forward? Where would you want to focus on in investment? You said that you were too focused on traction motors. So would it be MOEN or would it be precision motors? You talked about how there's a good growth potential. So where would you increase investment? Where would you want to focus your investment in order to grow sales? Like you said, MOEN, I know that this has a huge growth potential. If you look at it, you can tell.
So if you look at the mid- to long-term, you know, you know, you know, global facilities, those are the things that would be essential. Also, battery, we have very concrete energy saving product. We purchase this from Emerson. So Emerson has a very high technology and a strong technology at this, so it's kind of like Hitachi purchasing AD. So energy sector, which is new, but this is basically all motor-related. So we will look at large-scale motors. We do not have the technology from before, but if you add that, and that would include control technology as well, and it will take us 30 years to start from scratch. So we want to do an M&A with companies with those technology know-hows and grow. But the problem is, motors are... It's not just a plug-in to electricity.
Most of them are battery-driven motors now. So whether it could be a conventional vacuum cleaner, it's all cordless. For example, hairdryers used to be very heavy, but it's now much more efficient and it's now wireless. We have strong technology in here. Even the companies we had acquired in the past, the reason why, for example, MOEN is very profitable now, is because of our success in M&A, and we have added on new technology, and that's contributing. The M&A from now on will be different. The technology we purchase, we buy, is different from before, and with this new technology, we're able to make it completely more profitable. I know that some of the analysts, you know, are writing this report that's completely wrong.
This is the reason why the valuation has gone down so much. But it's only just that a structure motor is just a very small percentage of our entire business, and it shouldn't really undervalue us like this. I mean, I think the analyst doesn't really understand our company. I mean, that's the assessment that analysts, they have to accept it. But you know what? I want to buy this company myself, you know, 100%. I probably shouldn't be saying this, but, you know, I'm trying to keep myself the constraint, in restraint today. But a lot of people aren't coming to the plants anymore, so they don't really understand the actual product, and they still write these reports, and in most cases, they're wrong. So please wait and see.
I'm not going to end at this. I am becoming more and more bullish, so I probably need to stop at this point. Does that answer your question? Thank you. So our time is almost up, so this one question will be the last question. Do you have any question? Yes, then this person here in the front.
Hira from Nikkei Newspaper. Two questions. One is a clarification. In traction motor business, in page seven, you have a wording that says, one-off cost, one-time expense. You talked about facility and inventories. You talked about JPY 45 billion. So if you deduct operating losses, is that what it is? Or, what does it contain, and what's the breakdown?
There's so much we can disclose.
I mean, he's from a newspaper company, so he doesn't really understand, so you should only speak in rough big picture. In Q2, we talked about how we will shift our strategy, and after that, we reviewed and identified the risks, and we've done this for the last three months. The JPY 45 billion that we have indicated this time is about JPY 10 billion in parts and facilities and equipment, about JPY 30 billion, and the rest, JPY 5 billion. So, in Q4, we will scrutinize this and make sure that we are able to have a precise number here. It will be in particular Gen 1 related, especially when there was a chip shortage in COVID. Even in this long lead time, there was a lack of supply, and we...
There were components that we were placing orders on just a volume basis, and we have a lot of that still on hand, and they're all Gen 1 related. So we will be reviewing all of that. So that's the assumption. So that's the situation.
Thank you very much. I have one more question for chairman. Excuse me. So a question for Mr. Nagamori. So EV market in China, even though there's a cut-price competition, it still drives the global EV market, and currently, the market is very difficult, but maybe next year or the year after and going forward, would it be a growth driver for your company? Do you have a lot of expectations for China? So would you give me your mid- to long-term perspective on this?
Well, we're number one in China.
It is, China is growing, so, in AC motor, we're number one manufacturer. So we still have a top market share, in many of the products in China, and there's technological innovation in China as well. Where there's a big transformation is... The thing is, the Chinese companies themselves think that there's not, won't be a very large growth going forward, so that's why they're exporting a lot. And if it becomes export, a lot of the Chinese products are not accepted, so then it will be replaced by our products. So there's an element of that. I would say it will take some more time, but, whatever is of high quality, people are willing to pay high price. So can they export, with the Chinese, motors? I would doubt it, and they all know that.
So Chinese customers, you know, they talk about go export, export, and there's a lot of acceleration for export. So in that sense, I think many people say it's Nidec. It has to be Nidec, and I think that would be the case with traction motors in the future, too. Because they say price is the first and foremost, that is why we can't work with some of these clients. We want customers who understand the value, the technological value. We don't want them to price it with ignoring that value. So that whatever is being the order has been placed, we have received, we will need to produce, so there's relationship going on, but there's just a few more to go. So Gen 3, going forward, you know, it's not that we've only produced for China.
We're going to make these products in China, but still, we're not going to make any products in order to, just to make loss or deficit. We're going to produce products for those end products to be exported from China to overseas. That's the only type of products we are focused on. We are not going to any unfavorable competitions. Here's one additional question here. When do you think it's going to go down? When it go, do you think excessive competition in China is going to stop? It will end sometime in the future, and just like anything else, and now the price decreasing is significantly dramatic and too expressive. This is the first time that I experience something like this in my long-term career.
But all of this company involved in such competition are now gone in the market. It's not every day, but these companies are going one after another. If you're going to do business with such companies, we are going to be ridden with deficit. We need it is better for us to quit such a business as soon as possible. Little by little, like our GNET, the Guangzhou Automobile, in other words, GAC, is one of those companies in China that are paying us properly, but all the other companies are breaking, tend to break the promises with us. That's not the type of business we are used to. We shouldn't be having such business anymore. We're not really only focused on sales.
We are focused on operating profit as well, which is more important than sales. We're not going to have inflation, but we need to have a healthy growth with the at least minimum operating profit ratio of 15%. We purchased various companies that were in deficit, loss-making deficit. The loss-making companies are what we used to purchase. Now, we need to recover the traction motor business, which is making a loss, and stopping the bleeding will make a huge difference in the sale. Now, it's about the time for us to finish this presentation. This is all for the presentation by Nidec Corporation. The financial results for the third quarter of this fiscal year of 2023. Thank you very much, everyone, for your time. Thank you very much.