Good morning, good afternoon, and good evening. Thank you very much for joining Nidec's q three fiscal year twenty twenty conference call. I'm Kyori Chorikasa, general manager, George Branch of Mitsubishi UFC 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 at this moment.
Please note, this call is being recorded and the conference materials will be posted on the company'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 and mister Akira Sato, first senior vice president and chief performance officer. First, mister Sato will make a presentation. After his presentation, we will move on to a q and a session, and Mr.
Seki and Mr. Sato will answer your question. Mr. Sato now presents Nidec's Q3 fiscal year twenty twenty results, future outlook, and management strategy. Mr.
Sato, please go ahead. Thank you very much, mister Orinkasa. Good day, ladies and gentlemen. Welcome to today's conference call.
My name is Akira Sato. Me mister Jun Seki and myself will be your main speakers and answer your questions. Joining us also is mister Masahiro Nagayasu, general manager of Nidex IRT. For the forward looking statement, please see slide number two of our presentation material for details. Now I will debut the key figures.
Please see slide number three for fiscal year twenty twenty nine months results. As shown on slide number four, nine month net sales stood at record high, $13,000,000,000 yen, 1 hundred 80 5 billion yen, 2 point 2 percent higher year on year. The nine months operating profit increased 24% year on year to JPY115.5 billion. The December quarter's net sales increased 4.4% quarter on quarter to 4 and 33,200,000,000.0, marking a record high for two consecutive quarters. The operating profit for the same period increased 12% quarter on quarter to 46,400,000,000.0 yen due to increased sales and contributions from comprehensive improvement on cost structure and optimization of fixed cost through the WTR four program.
Based on these results, we have made an upward revisions to the three year fiscal year twenty twenty fiscal financial forecast. On slide number five and six, you have pictures 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 lower chart on slide number six, automotive, appliance, commercial and industrial or ACI and the machinery segments have been the main drivers for the q on q profit increase in the December. Please see slide number seven.
As you see on the right hand side, the free cash flow keeps increasing from the June to December through continued efforts to improve cash conversion cycle or CCC, and we have achieved record high operating cash flow and free cash flow of December. Please see Slide number eight. Based on December result, we have made an upward division to the three year fiscal year twenty twenty financial focus, which is the second second time this fiscal year following the previous quarter. Please see a sign number 11. Due to the net sales recovery and the contribution from the WTR four program, the quarterly operating profit ratio is on its way to steady improvement after forming the bottom in the March quarter of fiscal year two thousand nineteen.
And has recovered to 10.7% in the December while achieving record high net sales for two consecutive quarters. Please see sign sign number 12. Green transformation is triggering innovations in the auto industry, which is similar to those in the TV and the camera industry that occurred in the past. The industrial structure goes from local practical integration to global horizontal specialization. The product design from integral architecture to modular architecture.
In the automotive industry as well, we are seeing shift from more complicated and expensive internal combustion engine or ICE vehicle to simpler and cheaper electric vehicles or EVs, which makes cost competitiveness even more important. Please see slide number 13. We are foreseeing that growth we experienced for over thirty years in the harvest live industry is going to happen in auto industry triggered by electric vehicle development. As you see on the left hand side of this slide, the hottest ride market has been growing significantly based on technological innovations related to motors, magnetic heads, medium, etcetera. Now in the EV market, as you see on the right hand side, rapid growth is expected for the turning point year of 02/2025, and we need to prepare for mass production.
For this purpose, we are aiming to construct in in house production for inverters and gears while preparing more assembly lines and also aiming to pursue their cost competitive advantage of mass production. Please see slide number 14. The total number of six EV models using our E Axle, which is traction motor system for EVs, has exceeded 100,000 units on a cumulative basis as of the December. And the sales volume in the December increased 25% year on year. Please see Slide number 15, the profitability of automotive existing business, which is excluding impact impact of the traction motor related business and needed mobility business from auto business.
Has recovered to double digit operating profit ratio and is keeping the upward momentum after the decline December quarter of fiscal year two thousand eighteen in the wake of Chinese economic slowdown and bottoming out in the June quarter of fiscal year twenty twenty caused by COVID nineteen. Slide number 19. Sorry. Slide number please see slide number 16. Both net sales and operating profit ratio of ACI are steady improving from June to the December due to the WPL four problem.
ACI is currently undergoing a comprehensive review of its cost structure, and it is ready to improve operating profit ratio by optimizing outsourcing costs, labor costs, and fixed costs. Please see slide number 17. Sales of other small precision motors has hit record high
in the December due to the new state home demand. We are seeing further growth of our business of ratchet f DC motors, which are used almost everywhere in such applications as home appliance, living room, sanitary water supply, kitchen, smartphones, PCs, gaming consoles, and printers.
Please see the number 18. UltraSync and UltraSmo fan motor, FDV or UFS, which is used mainly for PC application, is keeping high level of shipment of over 5,000,000 units for three consecutive quarters. And it's firmly supporting the demand for work from home. Lastly, on behalf of the entire management team, we would like to thank our customers, customers, suppliers for their support and commitment as well as our stakeholders. At this time, we would like to open up the call for questions.
Thank you for your attention.
Thank you very much, mister Sato. Now we'd like to turn to the q and a session. Mister Seiki and mister Sato will be will be pleased to answer your question. Today's question and answer session will be conducted electronically. If you'd like to ask a question, please press the star key and one on your touch tone phone.
Again, please press star and 1 if you would like to ask a question. If you would like to cancel your request, please press and 2. We will now pause for questions from the participants. First question today is James Palford from Alma Capital. James, please go ahead.
Thank you, and good evening. I'd like to ask, if I may, about your precision small sized motor area where clearly your one half of it, the other precision motors performed very strongly, but the HDD side was weaker or in terms of sales, was weaker. And could I just make sure I understand first what's happening within the HDD side? And volumes, I think, were about 41,300,000.0 for the quarter. So that's a very sharp fall, but ASP rose.
Could you comment on what happened within that in terms of mix? So if you have, for example, nearline volumes in ASP and enterprise volumes, and, if you could comment, on your changes in share in the different, areas you have there, that would be very helpful to understand what's happening within HDD, please.
Okay. This is Masai Zhonaria speaking. So clearly, volume dropped. Our shipment volume in September was 63,200,000, and this December number is 41,300,000. And this is mainly because one customer did not order our motor for the fourth quarter, December quarter.
So that means the the change of the mix as well as the change of the pricing. And the query, as you maybe calculated, the ASP rose from $7.00 2¢ in September to this December, '7 dollar '40 '6. So overall, we see the high ASP but the lower volume, mainly because we could not get the order from a particular customer. Is that fine?
Yeah. So in terms of the in terms of the volume pool, was it much greater for commodity items? And so for nearline and enterprise, it's much less. I'm sorry. Without question, again, it's too much detail.
Do you have the volume figures for those? That would be helpful if you do.
Mhmm. In terms of the so called the the revenue share of server area, meaning a 2.5 inch high end and the nearline, was a 54.5% in September. But this December, that rose for that would that that number rose to 64%. So clearly, the 2.5 inch number is down, but not as much as 2.5, three point five. And your line number is also down, but not as much as the 3.5, two point five.
So overall, the product mix improved. Thereby, the the share of those a server area spin of water rose from 54.5% to 64%. Is that fine?
That's fine. And just thank you very much. And just to follow-up, obviously, you're a little constrained in what you can say. But in this particular quarter, you received no orders at all from what has hitherto been a main customer. You can't predict the future, but it's possible do you think it's quite possible that you will not receive further orders from that customer going forward?
It's quite possible. Would you agree with that statement?
Well, number one, that we are not forecasting the number, as you know. So it's our policy that we are not talking about the future number. But as we say, maybe the previous quarter that we are not expecting any sales to that customer during the March. So there are no sales in December. There will be a no sales in the March for that particular customer.
Okay.
I understand. Thank you very much. I'm sorry. Just so I don't wanna take too much of your time for other people. But in terms of the other Precision Motor side where you saw a sharp bounce in sales from there.
Were there any particular areas that you would highlight? And other than that, you have fan motors, DC motors, heat sinks, other areas. In terms of the strong recovery and strong growth in sales, Could you comment a little in a little more detail about what drove that?
So in terms of the non HPD motor, small precision motor is something that you are asking? Right?
Correct. Non HDD. Yep.
Also, maybe we're showing you the slide number 17
Yep.
Where those motor are used. So, particularly, we see the a motor for the home appliances is very, strong. And thereby, we were talking about the home appliance, living room, sanitary, kitchen, or whatever. Also, we are seeing very strong demand continue in the IT area such as a smartphone and PC. And also for December, still the gaming consoles have been a really quite a good good demand, and all those would help to achieve the record high sales of the non AED small precision motors as you see in slide number 17.
Okay.
Okay. And do you think do you think this very strong because, obviously, for this quarter, we're in a naturally in a period of very strong demand recovery in in areas like autos and also also in IT. Have you seen a do you think is is this largely reflecting this very strong cyclical upturn, or is there a change into a significant change that's happened in the short term looking at the share between brushless and and and brush motors?
Well, at this moment, we we cannot say how wrong this very strong demand continues. It could be cyclical. It could
be more
prominent. But so far, we have seen a very strong demand in the home appliances as well as IT. And the also, server demand has been somewhat weak in September and December, but we are seeing some signs that is coming back. So, seasonally, March would be somewhat weak weak quarter that we understand. But what what's gonna happen from a next June is something that we have to see.
Is that fine?
Great. That's fine, Zoran. Very last apologize. Very last question. Just to understand the profitability, which was stable overall within that area.
For the hard disk drive area, was there any change in profitability? Could you comment on that, please, for q three?
Okay. We are making, you know, public that the OP margin for the hard disk drive for the December was a something like 31.8%, gov number, and non gov number is 37.4. So those are the number for a AT and T spring and mortar business for a December. Clearly, those numbers are higher than a previous September. Okay?
Thank you very much indeed.
James, thank you very much. Our next question is from Zac Inouye of MOFD Securities. Zac, please go ahead.
Good
morning. First of all, congratulations on your very strong results. Two part question from me. This is on your EV traction motors. Slide 14, very helpful always.
You mentioned about the Chinese automakers increase and so forth orders. But can you provide more color regarding order inquiries coming from the Chinese EV automakers? My second question is regarding to your EV traction motor production capacity plan. If you can give us a little more clarity or remind us about your production capacity plan going into 2025 and maybe 02/1930, that will be great.
K. Thank you, Inoue sanzak. This is Sig speaking. First, about the what was the first question? Structure motors.
Sorry, Zach. Can you repeat it again, your first questions?
Oh, sure. Yes. Order inquiry coming from the Chinese EV automakers. Previously, you mentioned you you still have a eight to seven.
Thank you for reminding. First, up to q two financial announcement, we keep telling the trading OEM is keep increasing. Like, it was 16 and then increased to 22, but we had a lot we received a lot of complaint from OEM. They don't want to ask to mentions because area by area, maybe, you know, investors and analysts may lead to them because of some characteristics. So from this time, please allow us not to mention the part number of new OEMs into our business.
Instead, in this quarters from October, November, December for three months, we received 15 new projects. It's all decided, but at least the request to studies. You usually, quarterly, have a five to six. So this 15 is more than doubles. So it's really representing our awareness based on our result is getting more together with acceleration of EV from Europe and China particularly.
This is expanding to Japan and US. Of course, this 15 has a lots of Chinese business. Please and as I mentioned in the beginning, please allow not to tell you too much details. And then for your second question about the capacity preparations, While we are having many new projects from customers, we still don't want to change 2,500,000 target for 2025 because we are seeing, you know, probably after '25, probably volume will accelerate. But for the preparation stage from now to '25, I think our customer volume is somewhat very reliable, but some are not.
So we don't want to be too much optimistic, but at least 2,500,000 is our plan. And then we will be ready to produce 2,500,000 or over by that times. And then to do that, what we are making effort is in house parts and in house equipment. For example, what wiring machines and or dies or measurement machines. And then for the components, maybe years and the inverters.
Because we believe after '25, volume will accelerate all of a sudden. And then if we are relying on those too much outside, we can't get the speed and then also price from parts and components and equipment will be very expensive. So we want to control those. So now our target is one side of price against outside and the one side of lead time from market outside. Of course, this is very aggressive, but we're confident to achieve this.
And that's what we are preparing. And then because of thanks for total lead times, and we don't have to make too much early decisions because our lead time is short. So those are what we are doing. But as you know, we already have a two plant. It's already started.
One in painful and the other one is granules. And the next year, we have a second line in the painful. And then we are planning for fourth and fifth. So that's and then, of course, in Europe, we have a farm plan to produce attraction noted for one customer. So that's ongoing.
Is that clear answer to you, Zach?
Yep. Very clear. Thanks so much.
Thank
you for your question, Zach. Our next question is from Ramzi Nilam of State Street.
First of all, congratulations on the on
the great quarter. It's it's really impressive. So one of my first question is on WPR four program. So I understand in first half of the year, you saved almost $10,000,000,000 in each quarter. Can you highlight a few things, what you achieved in Q3 in terms of how much you saved the cost in the areas?
And also, what would be the focus and scope of this program going forward?
The effect of the review of four in December might be the 15,000,000,000 yen. It is up to from the 10,000,000,000 yen in the September, Mainly, you know, due to the procurement cost reduction because the market is soft at this point. Maybe we we we are seeing some kind of a up trend of the low material. But Okay. This summer quarter, we materialized.
So that's kind of procurement cost reduction. And also the reducing the fixed cost. That's another another drivers to create some positive effect. So for instance, in Europe of ACI, that's so we allow destruction or integrating the factory. So so that we we by doing so, we we can reduce the fixed cost in European operation.
And that's why ACI's operating profit margin is coming up to above the 10%. That's fine. Is that is that fine?
Yeah. Thank you. Thank you. Yes. I have one more question to follow-up on James' question on HDD.
So can you is it possible to mention the market share in the month of December for Nitex?
What market share?
HDD, hard disk drive motors market share.
Oh, hard disk drive. Okay.
Yeah.
So at this point, we see the shipment of the of the quarter was estimated by Texas System Research sixty seven, then we shipped 41. Then you can calculate.
Okay. Yeah. Yeah. That's that's good. And I have a question on r and d.
So I think for nine months, the r and d was around 49,000,000,000 or we can call it 50,000,000,000 in, which was roughly around 58% of your full year guidance. So is that r and d's underspent so far? We can expect a lot of r and d coming in q four, or, like, what what's happening in r and d area?
You mean a total r and d or any particular business?
Yeah. Total r and d. And if possible, if you can give some numbers on e EV related business, that would be great.
Just to be tuition, then time to to r and d. R and d. So, yeah, it's r yeah. R and d. Can you cut this now?
Right. At this point, we we are keeping the r and d cost spending for fiscal year twenty twenty, which is 9 90 sorry. Sorry. One minute. Yeah.
Sure. Yeah. 85 Your full year
guidance is '80 '5.
Yeah. 5,000,000,000 yen of around the in fiscal year twenty twenty. So Mhmm. We keep this number. So in March, maybe we are going to spend a little bit more.
So at this point, maybe we are reducing the r and d cost try to reduce r and d cost. For instance, the insourcing sound can testing in the r and d. So we invested kind of a motor bench, which is a machine for testing. That's Okay. You know, one way to reduce the R and D cost.
So those are effort contributing to reducing the r and d cost, but we still keeping the 85,000,000,000 yen of r and d cost in fiscal year twenty twenty.
Let let me answer the points.
Yeah. Sure, please. Yeah.
Please. Please. Proceed. No. This is not a straight answer to your questions, but we successfully reducing while making efficiency better for the area.
One is a testing cost of production motors. We invested lots of test bench into China, and now it's started earlier than our plans. So traction motor testing cost to outside is extremely high, and then transfer for ahead planning of this internal test bench. So we are saving from that area. And then second, we have a a platform concept introduced into the traction motors.
So, originally, we estimated a very high r and d cost for peak differentiations. But time by time, we successfully reducing the differentiation level for product by product. That's what we're using. And then last, this is nothing from us, but many customer is postponing
Mhmm.
Many new products influenced by COVID nineteen. So this is not good since we want to have those order earlier, but nothing we can do. They are postponing. So that's making a natural reductions. So those are main drivers.
We have a list around this spending.
So if I can ask, is that R and D saving is one of the contributors in upward revision in your earnings?
No.
No. I I I don't think so. The upward revision coming from mainly the more more sales than expected. And also the as I mentioned before, that p r four, the effect That's creating more positive impact in our our focus. Yeah.
That's why that we met the upward division by Yeah. 15,000,000,000 yen in operating profit in fiscal year twenty twenty.
Yeah. That's great news. Thank you very much.
Ramzi, thank you very much. On behalf for the benefits of all participants, I'd like to remind you that if you would like to ask a question, please press the star key and one on your touch tone phone. Again, please press and one if you would like to ask a question. Okay. The next question is from Mark I'm of Bianco.
Mark, please go ahead.
Yes. Thank you very much. My question, it follows several other questions that were asked on slide 14 for the e axle. This is a monthly bar chart.
I'm not gonna ask you some when
you said that you're planning by 2025 to produce is that 2,500,000 per year of of these traction motor products compared to the current situation where there are 100,000 cumulative. Is that is that the correct way to read this?
Thank you, Martin. It it indeed, we're receiving those orders. So next year is more than doubles and then $241,000,000 and then '25 is reaching the two point at at this moment, it's precisely around the 2.3 millions. But, of course, you know, we are expecting additional order on top of that. Actually, this is a good reference on page 14.
As you can see, you know, quarter wise, it's better than last year by 25%. As you can see, volume from from each model are quite small. Actually, don't want to, you know, criticize for customers, but contract volume from each color are much bigger than this. So if we stack up only contract volumes, this is almost trickles from this result. So based on that, we are compressing customers' volume for forecasting 25.
So if it's up to up, we also we're saying it keeps 2,500,000. But last time, no complex of customers order 25,000,000. And this time, we're compressing times point eight or times point seven depending on customers and the market. So it's much bigger, but I think current forecast is much more realistic. But straight answer to your questions, those are we are receiving from order and then with our completion receipts.
So 2.5 will come.
Okay. I mean, that that is quite a ramp up, but, obviously, what you what you're saying, you know, in terms of demand profile and stuff would would make that possible. Can you just tell me just roughly, you know, you look you we're looking at a monthly charge charge here with with six models, and, you know, the the I n s is by far the biggest. When can we start to see, you know, more models and more colors joining these these monthly charts? Would that be towards the end of this calendar year?
We'll we'll really start to see things ramp up in terms of more models and more volume In in your opinion.
Sorry, Martin. I couldn't catch your question clearly. Can can you repeat it again?
Yeah. Just a very simple, just qualitative question. On page 14, when you look at the bar chart, you know, you have six models there. And, you know, gradually, you see more models being added to the, sales figures. When can we just qualitatively start to see, you know, more colors added to these bars?
I mean, more models coming on. I appreciate your your previous statement that you can't really reveal what OEMs are asking you. I I
know the secretive, but can you
just give us a qualitative feel? Is it gonna be towards the end of this calendar year or sometime in 2022 that the these these numbers really start to be visible in these sales?
Volume increase coming from expansion of the order. And then Yeah. I think it will stay small from each color. I I think it's increased. If we go back, you know, page 13.
Mhmm. K? We are splitting the three areas and then up to 25, we say this is introduction period. Lots of hesitation from both OEMs and customers, mainly because battery is high. Because battery price is high, EVs expensive than hybrid.
That's the reality. K? But we are seeing battery price coming down. And then also, we are seeing customer not all of customer, but some of customer is trying to compromise autonomy distance. So at this moment, all OEM preparing a big capacity of batteries such as 60 kilowatt and 80 kilowatt while unit price of battery is very high.
But the battery is coming down and some customer say, I'm okay to drive only 300 kilometers because he has second car or he's not going to long travel because of his age, such as such. So if it's, like, a 10 yen per watt and then if he compromises, like, a 20 kilowatt, suddenly EV become much cheaper than hybrid. That's what we are seeing, and then we are setting, a 25 is a break point. It's going to accelerate. So from that point, probably, even we have a a same order, each color, each order become much bigger.
That's what you're saying. So this video, we need to be very patient while we're having the inefficiency developed more than one another, but volume may stay same because we have a lot of competitor. Competitors cannot stay with this situation. And then we are very welcome competitor to escape or remove from this area. Only stronger state is segment.
That's what we are saying. Okay.
Thank you. That that that clarifies it a lot. Thank you so much.
My my next
question is small motor demand, you know, firmness as demand for these motors, as you mentioned, moves to, you know, total washlets and washer dryers and all that stuff. Is this uptick, you know, probably due to the stay at home situation, your long term CapEx plan for the HDD or for the small motor area?
No. No. At at this point, that's not changed.
Mhmm.
Because how this drive business is already a cash hub business. That's why we do not the plan to invest money to that that business. On the other hand, other precision motors, maybe demand is very high. That's why we not planning to invest a little bit more to increase the production capacity in those appliance area. So but total capital expenditure is around 120,000,000,000 yen at this point for fiscal year '20 '20.
Okay.
So that we we do not have any plan to increase the capital expenditure for increasing the production capacity for those areas
at this point.
But you think you're okay? Six six speaking. The demand might have started because of those stay homes. But what we are seeing is world becoming much more sensitive against the decarbonization's CO two reductions. So everybody are very sensitive to have a much more efficient energy spending.
And then, obviously, our brushes motor are very efficient for every aspect. It bit expensive than, you know, brush brushing motors, but much more friendly for environment. So even small product to large product, we are sharing customer need more efficient ones. That's really leveraging our sales. So may start with stay home, but I we believe this is more sustainable.
And you think your current capacity level is sufficient to meet this future demand?
Future demand?
Yeah. As as, you know, more more people, as you mentioned, you know, switch to brushless because of the energy efficiency plus the near term situation with the, you know, work at home.
You don't think so?
I cannot say by when, how much. But Mhmm. Our overall brushless motor share is still 35%.
I see.
So, you know, we have a 65, 70 percent room to expand.
Okay. Okay. Understood. I'm sorry. I'm gonna just ask one more question.
I'm I'm taking a lot of your time, so I apologize. On this presentation, on the on the very cover, you put a picture of what looks like a compressor from Embreco. Can you tell us why you chose to put that picture there? And just are you seeing a big uptick in demand because of cold chain demand globally for these types of products?
Yeah. Will you say your question was lower? Because, the quality of the, voice is not so good.
Oh, I'm sorry. Yes. On the presentation packet, that we have, on the first page, you put a picture of what looks like a compressor, right, from Embraco? Can you tell us why you did that? And is there indeed a big surge in demand for, you know, for cold chain investment globally that you're seeing through Embraco sales?
Yeah. The
face page is this picture is compressor for refrigerator. And as you know, the we acquired the com Enblaco, the 2019. And the the the including the production capacity and demand is very, very strong at this point. That's why we are spending money to increase the production capacity because the maybe the more efficient, the compressor or refrigerator is is needed in the marketplace. Because we we are now the quicker staying home and we need more efficient refrigerator.
That's why the demand is getting stronger at spot in for the the those kind of compressor for.
Again, speaking. It's fact demand of complex sites is very high. You know? We don't have enough capacity. Volume sales volume is as we can make.
And then we don't know the early reason, but we guess, you know, this is caused by stay home. People need lots of capacity to keep because they don't want to go out. So, actually, both for marshal use and the home use, compressor is flying. Yeah. Then maybe because of this COVID nineteen, and then if COVID nineteen becomes stable, compressor demand may go back.
And therefore, we don't want to invest too much. It's also it's fine, but we are doing the minimal investment and the maximum effectiveness of the capacity increase. That that's a limit at this moment.
Okay. Thank you very much for answering my questions.
K. Mark, thank you very much. Our next question will be coming from, again, additional question from Ramsey. Please go ahead.
It's just a quick one. Just looking at the guidance, So previous year guidance on PBT and net income, the gap between PBT and net income is around 31,000. But with the revised guidance, the gap has actually shrunk to 31,000 to 30,000 in spite the rise in PPT. So is there any tax effect, or can you can you explain is there any something we have to observe out there?
Are you talking about the gap between the the loss before tax and and the just the net net income? Is that is that gap that you are talking about?
Yeah. Yeah. So the gap has shrunk with the increase with the revised estimate even though there is an increase in PBT. So is there any tax effect we are talking about?
Yeah. It is a we try to improve the global effective tax rate. How do you level nine? That that's an effective tax rate is expected at 20% in
Okay.
Updated forecast at this point.
Okay. Thank you. That is helpful.
Okay. Thank you, mister Milam. We have only a few more minutes. And the next question is from Harry Wade of BMO Global Asset Management. Please go ahead.
Hi there. Thank you
for taking my question, and congratulations on the results. Just a quick question about your Slide 13, the traction motor vision slide. When you talk about 10,000,000 units by 02/1930, do you could you just let me know if you have a rough estimate of what that what market share you're imagining you would have in that year? Is that like a 25% market share or 50% market share of all of the e axle being sold, or or do you not have that kind of modeling?
Thank you, Harry. We're expecting 30 to 35% market share at this moment. But, Harry, we are seeing a very different view since last year, September, October. It's called called Shanghai GM URIN Hongwan Mini. That's extremely cheap EVs.
It's only Yeah. $4,000 or $4.04 $4,200 EVs. It's small, but it's really four four wheels and then 85 newtons. They made a compromise for new drives. It's only 10 kilowatt batteries.
Therefore, officially, it's a 20 kilometer drives. Maybe the air base is 80 seventy, eighty kilometers. But after they launched, next month, they sold 20,000. And then November, December, they reached 30 to 35,000. That's Shanghai, URing can make.
They already increased one line to adapt to this market demand, and then it's not enough. So they are now quickly adapting the one more line. So capacity become 50,000 per month, which is 600,000 per year. And then still, I think the demand is much more. So this
is really
proving. EV launch cheaper than gasolines, it's really fine. And then, you know, usually, lowest price vehicle was around $88,000. And then many people love to purchase a car, but their their income didn't reach to purchase. And now it's lower, and then many people actually do that in China is very doomed to purchase this car.
And then we believe this will be expand entire China and possibly like India, Africa, Latin America. So by that time, TIV concept is completely changed. So current vehicle segment will stay with, like, 80,000,000 to 90,000,000. On top, we're expecting maybe 100,000,000 to 200,000,000 new demand may come because of this cheap segment. So with that, you know, we, of course, challenge that area too, but we have to say this green line is based on current structure of big gradient.
And then future, it may not. We I just wanted to transparent to you that new segment may come and then we may have to read the note this line. But straight down for two. Okay. Thanks.
Thank
you. That makes sense. And can I ask one very quick follow-up, please? Just given given Tesla's reputation for vertical integration and given how valuable and an important a part the axle is within an electric vehicle, do you model or imagine in the future that they will be a significant customer of yours, or do you think that they're likely to remain, kind of would look to have this product manufactured in house?
Sorry. That that kind of integration you mean is, like, page 12?
Yeah. Just exactly. Just thinking about how how much Tesla likes to do everything and make as much as possible internally rather than outsourcing. Okay. I wonder whether That's your you're
talking about that current integration. Yeah. You know, parts by parts, equipment by equipment, we have to split to two. One is very popular. Everybody can do, and then it's same equipment as, like, engine transmissions, like die casting machines, typical.
K? While engine and transmission abandoned volumes and then traction motor housing may be quiet produce. So that's not a rushing point. But meanwhile, winding machines or die for core, those are very special. So special area will be very congested because, you know, page 13 and then, you know, after 25, it's accelerating.
So that's really have to introduce as like in house, we believe. And then we have to split those two. And in the future, once demand is stabilized, we don't have to keep those. We may have we may release, we may keep. It's depending on cost and profitabilities.
So those are what we are thinking.
Okay. Thank you.
Thank you.
Thank you, mister Weig. And thank you very much for your active participation, all participants. Now we would like to conclude the conference call. I'd like to appreciate for your active participation. Should you have any further questions, please do not hesitate to contact Nidec Corporation or your sales representatives at Mitsubishi Evgen Morgan Stanley Security.
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