Hi all. Thank you very much for joining Nidec conference call. I'm Taku Miyagawa, General Manager of Corporate Division, Mitsubishi UFJ Morgan Stanley Securities. As we kick off the conference, I'd like to ask you to make sure all the materials are ready in front of you. If not, please download the files on Nidec's homepage right now. Please note this call is being recorded, and the conference materials will be posted on Nidec's homepage for the coming week for investors and analysts who are not able to join today's call. Now, I'd like to introduce today's attendees from Nidec Corporation. Mr. Jun Seki, Representative Director, President and Chief Operating Officer.
Hello, everyone.
Mr. Akinobu Samura, Senior Vice President and Chief Financial Officer.
Hello, everyone.
First, Mr. Samura will make a presentation. After his presentation, we'll move on to a Q&A session, and Mr. Seki and Mr. Samura will answer your questions. Mr. Samura now presents Nidec's Q1 fiscal year 2022 results, future outlook, and management strategies. Mr. Samura, please go ahead.
Okay. Good day, everyone, and welcome to today's conference call. My name is Akinobu Samura, Chief Financial Officer of Nidec. Today, Mr. Jun Seki, Representative Director, President and Chief Operating Officer of Nidec, and myself will be your main speakers and answer your questions. Joining us also is Mr. Masahiro Nagayasu, General Manager of Nidec's IR team. For the forward-looking statements, please see slide two of our presentation materials for details. Now I'm going to review the key figures. Please see slide three for our first quarter's results. As summarized on slide four, our net sales increased 20.8% to JPY 540.4 billion, marking a record high on a quarterly basis. Operating profit increased 0.2% year-on-year to JPY 44.7 billion.
Profit before income taxes and profit attributable to owners of parent increased 30.3% year-on-year to JPY 57 billion. 23.5% year-on-year to JPY 41.3 billion respectively. Both stood at record highs on a quarterly basis. On slide five and six, you have step charts showing the net sales and operating profit year-on-year and quarter-on-quarter respectively, by product groups, with exchange rate effect eliminations and structural reform expenses. As you see the upper chart of slide six, overall sales increased due to a weak yen and strong machinery sales, which are backed by an increase in sales of semiconductor inspection system resulting from strong demands for 5G, and in sales of press machines on the back of plastic reduction.
This covered the negative impact from semiconductor shortage and lockdowns in China. Operating profit also increased due to increased sales and continued improvement on cost of goods, optimized fixed cost, and their reflection on the selling prices. This covered the negative impact from product mix change in appliance, commercial, and industrial or ACI. Please see slide 10. We are aiming to become number one automotive hardware company by anticipating the strong electrification demand boosted by CASE, which means connected, autonomous, sharing and electric. In the EV traction motor-related businesses and mass production of E-axles by the joint venture with Stellantis is starting this September. Orders are increasing throughout financial year 2030 backed by the tailwind of strengthened environmental regulations in Europe.
In China, in addition to the two existing major customers, we are going to focus our resources on the five customers, including the three new ones. Based on this, we have revised up the target of EV traction motor-related sales in financial year 2025 from the previous JPY 300 billion to JPY 500 billion. In other motors and auto parts, the market in financial year 2022 is expected to recover gradually, while the increased raw material prices are expected to continue. We are accelerating the improvement of profit structure by passing the high raw material cost onto our selling prices and by reducing manufacturing cost. We are aiming to achieve JPY 1 trillion net sales organically, and JPY 300 billion additional net sales, through M&As in financial year 2025 in the automotive segment.
Please see Slide 11. The cumulative number of vehicles using our E-Axles exceeded 418,000 units, and the number of EV models has reached 11. Despite the April decline due to the lockdowns in China, the June quarter record shipment increase of 169% year-over-year. Please see Slide 12. We are making steady progress to make the E-Axle business profitable in financial year 2023 on a single year basis by introducing the second generation E-Axle in the first half of financial year 2022. The first generation E-Axle prioritized a speedy entry to the market and expanding market share. However, Gen-2 is designed to achieve higher performance and further cost reduction. We are also expecting to introduce Gen-3 in the second half of financial year 2025, one year earlier than originally planned.
Full theme is to gain overwhelming competitiveness to win through the high growth period. In the same turning point year of financial year 2025, we are expecting to recoup cumulative losses incurred in our E-Axle business. Please see slide 13. We have announced that we are going to build a flagship E-Axle factory in Pinghu, China, in addition to the six factories that are already existing or expected to be built in order to increase production capacity of E-Axles. This flagship factory is expected to be fully dedicated to E-Axle production, from parts manufacturing to assembling, with an annual production capacity of 1 million units. We are also planning to build the eighth, ninth, and 10th factories globally going forward.
As expected, the shipment volume of E-Axle in financial year 2025 has been revised up to 4 million units. We are going to prepare almost double the production capacity to cope with this. Please see slide 14. Nidec has established a semiconductor solution center in Kawasaki, Japan, aiming to plan and implement semiconductor strategy for JPY 10 trillion sales in financial year 2030 with Mr. Ryuji Omura as the director, who is the leading expert of semiconductors in Japan and joined Nidec recently. This semiconductor solution center is expected to build a strong partnership with semiconductor suppliers to establish a sustainable supply chain of semiconductors inside and outside the Nidec Group in anticipation of geopolitical risks and other contingencies, and to create synergies between semiconductors and motors, providing high value-added solutions.
The basic strategy for the semiconductor business is to optimize make or buy approach, and we are aiming to ensure stable procurements of semiconductor components. We currently purchase in the first phase to procure high value-added semiconductor components in the second phase, and to become a comprehensive motor control solution provider in the third phase. Please see slide 15. As higher raw material price and lockdowns in China pressurize profitability, we are preparing for the demand recovery by increasing selling prices and reducing costs. Please see slide 16. Paradigm shift from ICE or internal combustion engine vehicles to EVs is rapidly accelerating in two wheels and small cars as well. We are focusing on two largest markets of India and China in both electric two-wheeled vehicles and small EVs.
We are planning mass production in financial year 2022 for 11 projects, including six related to electric two-wheeled vehicles and five related to small EVs. We have aluminum foil motors for electric motorcycles in India, and with regard to production, we have converted the former HDD factory to that of micro mobility, and we are planning to double the floor area of our Indian factory. Please see slide 17. In the small precision motor segment, we are implementing business portfolio transformation amid HDD motor market structural change. Please see slide 18. In ACI, we are executing structural reform in overseas businesses and looking to enter a new phase of growth while gaining market share outside Europe that is shaken by the conflict.
We are going to accelerate top line growth through three new strategies in the fields of generators and battery energy storage system, battery charger for EVs, et c. For the air conditioner market, we are going to expand the business globally, mainly for industrial use. Assuming higher raw material cost continues for the time being the same as in the old business, we will accelerate improvement of profit structures through passing that on to selling price and reducing manufacturing cost. Please see slide 19. Despite headwinds posted by demand slowdown in Europe and raw material price hike, we are going to continue efforts to achieve operating profit ratio of 15%. Please see slide 20.
The newly created machine business group, that consists of two subsidiary, Nidec-Shimpo, and the newly acquired subsidiaries of, Nidec Machine Tool and Nidec OKK, is targeting, JPY 500 billion sales in financial year 2025, and JPY 1 trillion sales in financial year 2030. Through this new business group, we are going to cultivate a pillar of growth with high profitability. The growth strategy of machine tool business for the two newly acquired companies is to enhance production and sales in China, to win market share using Nidec's, competitiveness and brand power, and to pursue profitability through mass production effect. The organic growth strategy of Nidec-Shimpo is to strengthen production and sales through collaboration among our major brands in the press machine business, and to gain market share of reducers for six-axis robots.
Please see slide 21. In other product groups, the operating profit ratio since financial year 2021 is keeping high level of over 15%. Please see slide 22. With regard to the inheritance of Nidec's corporate culture, we are making continued efforts so that the founder's ideal management philosophy and passion will be succeeded to and penetrated into the next generation. Please see slide 23. We have now five internal directors, six outside directors, including four female directors, who were elected at the AGM held in June, resulting in the outside directors ratio of 55% and the female directors ratio of 36%.
With this new team, we will continue to make the best efforts for fair, transparent and highly effective governance system. Lastly, on behalf of the entire management team, we would like to thank our customers, partners, suppliers for their support and commitment, as well as our shareholders. At this time, we would like to open up the call for questions.
Thank you very much, Mr. Samura. Now, we'd like to turn to the Q&A session. Mr. Seki and Mr. Samura will be pleased to answer your question. Today's Q&A session will be conducted electronically. If you would like to ask a question, please press the star key and one on your touch-tone phone. Again, please press star and one if you would like to ask a question. If you would like to cancel your request, please press star and two. We will now pause for questions from the participants. Okay, our first question today is from Ramsai Neelam, State Street Global Advisors. Please go ahead.
Hi, thanks for taking my question. My first question is on organic growth. I mean, during the quarter, we have seen 15% tailwind from products, and if we exclude that, roughly we have 6% growth left. Can you break down 6% between the organic growth and also any growth from the acquisitions? That's my first question.
Ramsai Neelam, are you talking about the entire portion or any segment?
Yeah. I mean, it depends. I mean, is there any significant acquisitions, like in machinery? Looks like there is an acquisition, definitely. But broadly speaking also.
Machinery.
Yeah. I mean, I think it would be good. I mean, at the group level, I think it is fine if you can give a broader understanding at the group level.
As far as we have been saying is, as you can see, slide number 20. Can you see the slide number 20?
Okay.
We say fiscal year 2025, we are looking for a JPY 500 billion top line covering the A Nidec-Shimpo machine business. Okay? That can be divided into the pink portion, it's a new M&A, and the machine tool business, which means the Nidec Machine Tool and the OKK. The bottom part, the green part, is the Nidec-Shimpo organic growth. Roughly we say that's going to be making a 1/3 each. Is that fine?
in the Q1. I mean, I'm especially asking for the Q1, this particular portion.
Pardon? Q1.
I mean, we are talking about Q1, right?
Yeah.
Yeah. Okay. You know, my next question on slide 15. I made a little calculation there. It seems to me, the operating loss from the traction motor is roughly JPY 6.5 billion in the quarter. Can you confirm that? If true, it is actually the operating loss from traction motor business has increased from JPY 2.5 billion to JPY 6.5 billion. Can you explain those numbers please?
Sorry, Ramsey. Your voice is breaking, so it's very difficult to catch. Can you speak again a little bit clearly and slowly?
Yeah. Sorry. Okay, on the Traction Motor business, EV Traction Motor business, it seems like there is a operating loss of JPY 6.5 billion in the quarter, compared to JPY 2.5 billion loss in the Q4. Can you please, I mean, explain those numbers and what is the expectation on the profit making on Traction Motor business?
Yeah. You are looking at page 15, right?
Yeah.
I guess you are measuring gap between green bar versus blue bar. That is a loss from traction motors. Your question is Q4 versus Q1.
Yeah.
It's about JPY 50 billion-JPY 60 billion loss. Then that is constant. Mainly
Yeah, JPY 5.6 billion.
Sorry, JPY 5.6 billion. Sorry. I got one decimal wrong. JPY 5.6 billion. Majority of those are development fee for coming new product in 2023, 2024. Others are, you know, basically we said currently we are building and selling generation one. Generation one is not profitable yet. Each time we sell, we lose money. No. This is not answer to your question, but if we go to page 12. If you look at the bottom, gray arrow is our generation one, and the red arrow is generation two. In this quarter, we start producing this generation two. Time by time, we expand this generation two. This generation two is firmly profitable. We already confirm double digit. It matter of how quickly we can convert from generation one to generation two.
Originally, we said, FY 2023 is the year we make breakevens. Today, I announced we pull ahead by six months. Before, FY 2023, H1 was still negative, H2 become positives. That's why as total FY 2023, positive FY 2023 year alone. We already confirmed we can make a positive profit in FY 2023 H1 by six months ahead. This is not end. After we confirm this, we continue to make efforts to go ahead this to Q4 in FY 2022. Time by time we are improving profitability, preventing a cash bleeder from generation one, and then, that will make a much better in 2022 total profit of traction motor. You are right. At this moment, we lost JPY 5.6 billion in Q1, mainly because of development.
Okay. I got this. Thank you. On the similar line, I think you had also increased the outlook for fiscal 2025 to 4 million Traction Motor units. Can you give some color on what are the factors that are I mean contributing to the upward revision in outlook? Also, can you tell me what is the actual orders and the high probability orders of the 4 million units?
Okay. Thank you, Ramsai Neelam. I think you are looking at the page 26, left-hand side chart. If you look at the 25, we are saying in red letter, it's 4 million. It was 3.6 million in April, so we increased by 400,000. Before, we explained each time how many brands, how many models, but now it's too many. At least like brand and over almost 40 cars. We quit announcing those because it's too complicated. Instead, I would like to tell you few fact. We are talking about 2025, but in 2022, we had four brand in current lineup. Actually, four additional OEMs.
We cannot say clearly name of our customers, but all three are Chinese customers and one are international customers. Builder is Chinese, so all are Chinese, we can say. You know, up to today, we have two OEMs, GAC Motor and Geely Motors. Total model is over 10, but only two OEMs, so we are very glad to have four more OEM in this year. It will expand to more than 20 toward the 25. Yeah. That is fact one. Fact two, actually, what we have in our hand is about 5 million, not 4 million. Firm order is already reaching about 3 million, and a very good possibility, probability to get the order is 1 million. We have 1 million extra.
We are very confident to achieve this 4 million in 2025 at least. Third one, about 1.4 million of this 4 million is coming from Europe, which is we call Nidec PSA e-motors. That is a joint venture with current Stellantis, located in France. That starts production from this quarter. I cannot tell you exact months, but by this quarter, they start the productions. Actually, Mr. Carlos Tavares, CEO of Stellantis, already announced. I don't remember if he mentioned the exact months, but it is within this quarter, yeah. It will grow to more than 1.3 million in 2025. We're now receiving many inquiries from European companies and North American companies.
This 4 million will not stay. Time by time, we can expand. It will grow. We are very confident. The most important point is, if we assure this, we need to be ready to produce. That's why, I think p age 13 , we say capacity first. Not necessarily we prepare double, but we say, we need 6 million before 2025 because now 4 million and then it will increase to 4.2 million, 4.5 million, 4.8 million time by time a nd then I think, 6 million may not be enough. I think, we are one of the most aggressive investor for this production capacities because we don't want to miss any opportunities. That is answer to your questions.
Yeah. Thank you. Just one more follow-up here. Is there any guidance you can give for the target units for this financial year, if possible?
Sorry, Ramsai Neelam. Say it again.
Yeah. Is there any guidance you can give for the number of shipment units for this financial year for traction motors?
For this fiscal year?
Yeah.
To roughly 650,000.
Okay. Lastly, a final question. 650,000 plus NPE.
Yeah. The 650,000 is the E-Axle number we are going to build in China. At this moment, within this fiscal year, we say the volume of the NPE this fiscal year. Just a minute.
[Neelam-san], I think we cannot tell that way. Okay. S o that will be the pro plus. It may not be p lus alpha.
And we are not positively announcing, but we historically delivering traction motor for LCV world, light commercial vehicle world. Then that is about 50,000-60,000 this year. Overall, we can say this fiscal year E-Axle production is about 800,000. Together with the production we made last year, we can exceed 1 million within this fiscal year. If it's very fast, we may exceed within this calendar year.
Okay. That's great. Finally, final question from me is broadly, can you give an outlook, I mean, the demand outlook of the auto segment as well as ACI? The macro seems weakening in some of the countries. What is the current demand you are seeing in different markets? Do you see any slowdown in the current demand?
Okay. Just a moment. Can we go to page 19? Left-hand side is sales and right-hand side is profit. About the sales, we are still increasing from last Q4 to this Q1. As you can see, as a blue bar or green bar. Green bar is our ACIMs and motors, and blue bar is plus group companies. It's increasing. However, if we taking account, we are increasing price. Quantity-wise, not increasing this way. It's almost flat, but if we look at the segment by segment, industrial and commercial motors are increasing, while appliance is decreasing. That makes flat. For appliance side, you know, particularly, we are seeing a huge reduction from fridge and the washing machines. We say cold and wet. We don't know if this is temporary deteriorations or this may continue another year or two years.
If we look at the automotive world, you know, we thought it's coming back last year. Actually, it's very, very flat as like 80 million per year. Yeah. I'm telling my people in appliance teams it may not come back. We need a rapid right sizing for head count of direct labors or indirect labors. If it come back, we can hire. Yeah. I'm looking at the appliance volume very conservatively. You know, commercial and the industry is still fine. Does that answer to your questions?
Yeah. Thank you. Thank you very much. I'll join back with you.
Okay. Thank you, Ramsai.
Ramsai, thank you very much. Our next question is from Mr. Takashi Ito from ARGA Investment Management. Please go ahead.
Yeah. I just have a quick question on the machinery segment. Is the margins for the machine tool business, the one which you started in FY 2021, higher than the existing Shimpo's business?
Thank you, Ito-san. I think it's almost same. Actually, Shimpo business is still higher. Machine tool is catching up, and OKK is following machine tool. It's around 10%-12%, while original Shimpo is staying about 20%. Mix is 18.1%, as page 21 showing.
Thank you so much.
Yeah. You know, we are not increasing price. This is coming from pure cost reduction. Therefore, our customer is very appreciative. We are having many order from customer in global. Particularly, machine tool is a very specialized to build gear machining. We have a huge order of gear maker because of high electrification. That is happening. I think this future is very bright.
Thanks.
Okay.
Thank you very much, Mr. Ito. Our next question is from Mr. Tom Grew from Alma Capital. Please go ahead.
Hi, can you hear me?
Yes, we can hear you, Tom.
Okay, great. Thank you very much for taking my question. I was just wondering a question going back to talking about e-axle or traction motor, and I was wondering, is it possible to explain? You've said two things are changing. One is that the profitability will come sooner than we were expecting before, but also that you will be expanding production more aggressively than before, which together seem like they're going in opposite directions. Is it possible to explain how you sort of how we can have confidence in these two statements together?
Yeah. First, profitability. I cannot disclose at this moment. I'm sure our customer is not happy to hear their supplier having a high profitability. We don't trumpet this way. To you, our investors, confidentially, I can explain. We successfully reduced all production costs, including passive parts, by about 30% from generation one to generation two. Of course, material hike is still continuing, but we successfully took all compensation for material hike from customers. We can all enjoy this cost reduction for either price reduction for more market share or profit. In case we introduce all of those cost reduction into profitability, our profitability is secured as double digits. B etween 2022-2024, before 2025, that is most important period to take our market share.
We make a final decision depending on competitive situations. You know, if we introduce all this cost advantage into profit, that makes this program very profitable. By the way, currently, I don't want to say so clearly, but marginal profit base, it's almost break-even. Profit base, -15%. It's a huge gap. Last year, we lost JPY 24 billion negatives because of Traction motors. If t he traction motor is break-even, probably we reached JPY 200 billion for profitability. As Ramsai made a question in this Q1, still JPY 5.6 billion negative, but as I said, in H1 in 2023, we can make a positive. Yeah. That is profit situation.
Answer to your second question, production. Of course, you know, investment is giving pressure for cash flow. But once we talking about profitability, investment is depreciation. Depreciation line is about 4%-5%. That 4%-5% become a burden unless we fill all capacities. Let's say we fill capacity by 50%, impact is 2%-2.5%, not extremely huge. As I explained, we are very confident to make this JPY 4 million. Therefore, I think meanwhile, this is a typical Chinese customer. Chinese customer come to us and then pick up what they want, and they say they need it next year, less one year. In that case, we are afraid more to lose this opportunity than stress from depreciation. That's why our strategy is production first. It may impact some, but not huge for profit. That is what we are thinking.
Okay, thank you very much. Can I ask for the generation two E-Axles, obviously, as you explained, more profitable than the generation one. I was wondering, what are you expecting in terms of Chinese customers versus European or non-Chinese customers usage of second generation versus first generation? Because obviously, your existing contracts with Chinese customers that at the moment, they're all used to and employing first generation. So do you expect them all to switch to second generation very quickly or not? For Europe, will it just be second generation ?
Thank you, Tom. It's very, very good questions. What Chinese customer want is current delivery. Okay? This is very famous story, but, you know, Chinese government concerned long time because local player is always weaker than international player. Like Changan, GAC, SAIC, they are much weaker than Volkswagen, GM, Toyota, Nissan, with 20% price reductions. Yeah. Lower price. Still i nternational, huge market share. Chinese government are very unhappy to share some profit with those international players. That means with Germany, with Japan, with USA, yeah.
What we are seeing is, you know, in China, while ICE vehicle is reducing, EV is increasing very fast. Nearly 80% of those EV is produced by local players. When we look at this Q1 result, proportion of local players and international players is drastically changed. Now, local player is more than 50%, and the international player used to have 60% or more, but they are now like a 47%, 48%. This is around what Chinese government expecting, I believe. Therefore, they are whipping all automotive OEM to increase EV more.
You know, I didn't explain, but when we talked about the 4 million, we still using some compression ratio. Lately, Chinese player volume which Chinese player requesting us always happen 100% or sometimes 120%. I'm requesting my people to stop compressing their volumes because it's dangerous. It may change in future, but at this moment, at least, what they're requesting is all realized, okay? That is the situation. Therefore, first their requirement is delivery as they want. And second, of course, price. I have to say, you know, if we have any participants from China, sorry to say this way, but Chinese automotive market is still not matured yet.
Driver is not sensitive as European driver or U.S. drivers. You know, accelerations or quietness is less sensitive compared with European market. They want to make a more EV, and they want to sell more EV with, you know, firm delivery with cheaper price. That is their requirement, okay? Switch to Europe. If Europe is same tendency, I have to say at this moment, no. Because, European players still producing their traction motor by themselves in most cases. Stellantis case, it's a joint venture, but probably they are treating as like an in-house. Mr. Carlos Tavares announced that they have a very smart way to reduce cost of this powertrain production with much firmer control by joint ventures.
They are kind of exception, but except them, all are still producing, and then they are not crazily chasing volume yet. Second, in European market, still maximum speed is very important, even EVs. Then, range is very important too. Therefore, they are requesting a very high torque, high accelerations with very good quietness and motor efficiencies, which Chinese customer are not so sensitive.
I believe this tendency will continue for a while. Naturally, we may have to split specification for European market and Chinese market. At this moment, we don't have any problem with this because majority of production for China we have a Chinese plant. In Europe, only we have a plant with Stellantis. In future, probably this makes some problems, and then we need to maximize a common platform between Chinese and Europeans. At this moment, we are not facing that problem yet.
That's very clear story. Thank you. Can I just ask, in terms of, generation two and generation one, is that the specification split that you're describing o r within those two generations, are there different specifications?
First, generation two is much lighter, smaller, thinner. By weight, it's about 15%-20% reductions. In terms of NVH, noise vibration harshness, it's about 10% better. Torque and motor efficiency, it's almost same. Specification-wise, we just kept flat, and then all other made better. If we bring this to Europe, probably we need little more care for NVH and then maximum speed by changig the axle.
Okay. Your plan to switch people on to generation two instead of generation one E-Axle, that is applying for both China and Europe then, it sounds like.
Yes. That we are expecting. China, it's already confirmed. All our customers there, they want to switch.
They're all going to switch. Okay. Understood. Again, this switch is to drive the profitability improvement that you're talking about within the next year and a half, yeah?
That's right. The introduction itself start from this quarter. Actually, we can tell, it's September. You know, let's say in September, total balance of generation one to generation two is, let's say, 98/2. But month by month, it's gradually increase. Next to FY 2023 Q1, what I'm seeing is balances about 75% and 25%. Sorry, 25% generation one, 75% generation two.
Okay. Sorry, final question is, in the medium- term, once you've built the new factories in both Europe and again expanding in China, do you expect the margins to be very different if both markets are using generation one? I understand, obviously, the specs might be slightly different. Do you expect long-term margins or profitability to be different given the production location and pricing with customers and things?
If we look at the price of motor, we are seeing a much higher price in Europe. Therefore, if we make an exact same motor, profitability in Europe become higher than China. However, for Europe, probably we need extra specification, as I explained, motor efficiency or speed. That cost more. As a conclusion, I think profitability is become very similar. We have not started the business in North America yet, but we receiving many inquiry for North American customers. In North America, will be very similar too. But probably little easier to make a higher profit in USA because less competitions.
Okay. Okay, thank you very much. Yeah, thank you, San. It's very helpful. Thanks.
Okay.
Thank you very much, Tom. Our next question is from Mr. Jon Greenhill from Baring Asset Management . Please go ahead.
Hi. Thank you. I wonder if you could just give us more details on slide 14, and in particular, the timing of those three phases, even if it's a rough timing, how much you're willing to invest in that process. Perhaps a little bit more detail on what you think the benefits will be. Is it predominantly sort of security of supply, or are you looking for a big cost advantage from that?
Thank you, Jon. I think everybody on page 14. In the table, we say phase I, phase II, phase III. At this moment, we are completely concentrating to make a phase I, which is secure delivery. Actually, we held a kickoff meeting on June seventh in Kawasaki, nearby Tokyo, and then we invited more than 30 very famous semiconductor suppliers. We explained that, you know, probably our approach is a bit different from other of their customers, because we want to be very transparent for volumes. What we want is win-wins, not take-take. That's standard automotive volumes here. They were a bit surprised, but they positively support our approach. We say we guarantee volume for five years, and of course, we pay if it's less.
We also said, you know, if they don't deliver, we take penalty too, so it's evens, yeah. That communication is ongoing. I think we made about 50% completions. We still need another 50% to complete to secure those. Okay? That's phase I. We are going to complete this by this October or November timings. Okay? As I said, July volume is already more than 40,000 per month, and that exceed to 50 ,000 very soon and then 60,000 in Q3. We need a rapid action for this securing chips, semiconductors. Now, this team is preparing to move to phase II. Actually, they already made a draft RFQs, but I have checked once, but it's not yet enough.
They need probably one to two months more to complete this RFQ. RFQ is covering at this moment the traction motor, but also, that will expand to other automotive parts and also precision motor parts and then appliance, commercial, and industrial parts in next quarter. At this moment, this RFQ is dedicated to traction motors. Goal to make a long-term agreement with nominated supplier, as I explained in the beginning, yeah. We want. Then this is a direct answer to your question. Purpose is obviously both volume securing and also cost reductions, better price than current. Actually, up to the 2020s, semiconductor was nothing. You can request today and deliver tomorrow because inventory everywhere. It's changed from last year, 2021.
Nidec didn't have any integrated procurement. We have over 200 plants, and plant by plant, they were procuring semiconductor as they want. We have a price disadvantage because lots of extra inventory from this war. Now we realize that, you know, we are treated as like nothing, because each procurement activity has a very small volumes. Now we integrating this requirement as total Nidec to enjoy more scale merit. We already confirmed our demand of total Nidec is good enough, you know, to make supplier happier. That is what we are working with. Is that answering to your question, Jon?
Yes. Thanks, Sir. Great. Phase III, that sounds like a very long-term sort of distant target. Is that right?
Yeah. I forgot to explain. Very important point. First of all, we don't want to build by ourselves because we have no interest about semiconductor itself. We just need the semiconductor to build our product. Therefore, we want to avoid phase III as much as possible, but if necessary, we go phase III. First, we want to stop by phase II, and then we want to make a good price and good delivery from existing suppliers. If necessary, we don't hesitate to move to phase III.
Okay, Sir. Thank you very much.
Okay.
Thank you very much, Jon. We don't have much time, so the next will be the final question. Mr. Ito, Takashi Ito from ARGA Investment Management, please go ahead.
Yeah. Hi. Sorry, just a quick question. I had missed it earlier. What are the long-term profit margins for the E-Axle segment as such, the sub-segment?
Oh, that's very, very good question. Again, can we go back to page 26? Please look at the left chart. You know, from time to time, we are changing the 2025 volumes. It start from like 2 million and 2 .5 million, 2.8 million, now 4 million, okay? Why are we changing? We have not changed the 2030 target, which is 10 million, okay? This 10 million stands 45% market share at that time. Every demand prediction in 2030 is keep increasing. If we can really take a 45% market share, of course we dominate these areas. We can lead pricing. That time, I think, 20%, 25% margin is not dream.
Meanwhile, if we stay like 7% or 8% market share, of course, we cannot control this price. Important point is, we need market share by 2030 to get the higher profitabilities. As I explained in the transition periods, our engineering make a cost reduction anyway together with purchasing department. If we use those cost advantage for more market share or more profit with less market share, that become choice. It's depending on situations. Potentially we are aiming 45% market share in 2030 with 20%-25% of profitabilities. That is our strategies.
Just a quick follow-up. Right now the main customers of the E-Axle is from China, but how will the ASPs change if you start developing new products for the European car companies w hich need higher performance?
Yeah. This is what we are thinking, you know. Today's package don't have, but up to last time, we explained we splitting our customer type A, type B, type C. Type A, they love to build motor by themselves. Type C, they don't care if it's outsourced or in-house, because outsource is very competitive. They are procuring traction motor from outside like us. Type B is in between, it's a hybrid. Like Stellantis, they don't want to rely on outside, but they want to keep control. Their choice is like a joint ventures. Some are like technical cooperation and partnership. Whatever relationship between here, type B is some soft binding, hard binding, yeah. Then, we are concentrating to China. There are two reasons.
One, there are so many type C customers. They don't care to build by themselves. They're freely requesting us to build for them. R eason two is they have extreme short lead times, you know, now very much cash consuming because we need production capacity in advance. This is just average number, but current Chinese customer required lead time from order to SOPs about 1.5 years, while European player average lead time is about 3-3.5 years. Spend the money to make it cash. This lead time is very important, particularly our current volume increasing periods. Chinese is much easier to work with because of short lead times, lower requirement, and then more desirable volumes. Okay?
For this situation, we are building and selling in China. For Europe, I think they follow similar. We say type A, but actually type A is transforming to type A-dash . That is, you know, they keep final assembly in their side, but they request supplier to build stator or rotors or inverters and gear, and they purchase those as component, and they make just final assemblies. Because they now are realizing their in-house cost is far higher than our selling price because they don't have enough volumes, while we have enough volume already. Yeah. What we are predicting is they move to A to A- dash, and then finally it becomes C.
This transformation occur from cheap , probably for very high segment like segment E, segment D, segment F. They may keep in-house, but they can't keep their in-house production for like a segment C, B, A. That probably coming to us. Invading those one by one, and then maybe 2035 or 2040, probably no one build by themselves, or at least even they build just the final assembly. That's what we are seeing.
Thank you so much for your time.
Okay. Thank you, Ito-san.
Thank you.
Mr. Takashi Ito, thank you very much. Now we'd like to conclude the conference call. I'd like to appreciate for your participation. Should you have any further questions, please don't hesitate to contact Nidec Corporation or your sales representatives at Mitsubishi UFJ Morgan Stanley Securities.
Thank you, everyone.
Thank you, everyone, for joining the conference call, and you may now disconnect.
Bye-bye.
Thank you. Bye-bye.