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Sub-sector: Automotive
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Fundamental View
AS OF 11 Mar 2026While Toyota raised its FY26 operating profit guidance for the second straight quarter based primarily on a revised currency forecast along with lower material costs and expense/cost reduction initiatives, the margin forecast is well below its 10% FY25 result. Toyota’s lower profitability is primarily related to tariff impacts that are expected to be a 290 bp drag on its profit margin this year. While the FY26 operating margin forecast is also below Moody’s 10% downgrade trigger, we expect Moody’s and rating agencies to remain patient owing to the fact tariff mitigation initiatives take years to implement in the capital-intensive automotive industry.
Business Description
AS OF 11 Mar 2026- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. It operates through the following segments: Automotive, Financial Services, and All Other. The Automotive segment designs, manufactures, assembles and sells passenger cars, minivans, trucks, and related vehicle parts and accessories. Toyota is also involved in the development of intelligent transport systems. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 11 Mar 2026Toyota lowered its FY26 vehicle production and consolidated vehicle sales targets by 50k units (0.5%) each to 9.95 million, with lower production volumes anticipated in Japan because of delays in quality inspections, weather-related interruptions, and equipment challenges; targets still represent growth versus FY25 (+3% production, +4% sales).
Management boosted its FY26 sales revenue forecast by 2% to ¥50.0 tn and raised the FY26 operating income forecast by 12% to ¥3.8 tn based primarily on its revised currency forecast, along with cost reduction initiatives, lower material costs, and slightly lower costs for labor, R&D, and depreciation; FY26 operating income is still 21% lower than FY25.
Management maintained its FY26 tariff cost at ¥1.45 tn (the biggest driver of lower FY26 operating income) while currency is expected to represent a headwind; Effective April 1, 2026, CEO Koji Sato will assume the position of Vice Chairman and Chief Industry Officer, while CFO Kenta Kon will become President and CEO. We view these changes favorably as they reflect a recognition of the fast-changing competitive landscape of the global automotive industry.
Key Metric
AS OF 11 Mar 2026| JPY bn | FY22 | FY23 | FY24 | FY25 | LTM F3Q26 |
|---|---|---|---|---|---|
| Automotive Revenue | 28,606 | 33,777 | 41,081 | 42,996 | 44,828 |
| EBIT | 2,519 | 2,486 | 4,890 | 4,047 | 3,400 |
| EBIT Margin | 8.0% | 6.7% | 10.8% | 8.4% | 7.1% |
| EBITDA | 3,526 | 3,671 | 6,159 | 5,408 | 4,770 |
| EBITDA Margin | 11.2% | 9.9% | 13.7% | 11.3% | 9.8% |
| Total Liquidity | 15,864 | 10,090 | 12,401 | 11,595 | 11,595 |
| Net Debt | (1,719) | (2,825) | (4,025) | (3,355) | (3,355) |
| Total Debt | 2,580 | 2,724 | 2,868 | 2,736 | 2,736 |
| Gross Leverage | 0.7x | 0.7x | 0.5x | 0.5x | 0.6x |
| Net Leverage | -0.5x | -0.8x | -0.7x | -0.6x | -0.7x |
CreditSight View Comment
AS OF 11 Mar 2026We reiterate our Underperform recommendation on notes of Toyota Motor Co. and Toyota Motor Credit Corporation based primarily on relative value, although we consider the Toyota bond complex to be a relatively safe haven for long-term investors.
Recommendation Reviewed: March 11, 2026
Recommendation Changed: May 09, 2025
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Fundamental View
AS OF 11 Mar 2026Nissan trimmed FY25 guidance for Japan and Europe while maintaining North America forecasts and raising China projections. Operating profit outlook increased on stronger Re: Nissan cost savings and favorable currency revisions. Despite near-term automotive losses and negative F1H26 free cash flow, management targets sustainable automotive profit by FY27, supported by increased NEV mix in China and US hybrid launches.
Nissan’s bonds outperformed HY and BB indices by 18bp and 13bp respectively. Trading 30bp wide to BB but 70bp tight to HY, spreads could tighten towards BB on sustained momentum. We upgrade to Outperform on solid Re: Nissan execution, US reshoring, and improving fundamentals.
Business Description
AS OF 11 Mar 2026- Nissan, with headquarters in Yokohama, Japan, is a leading global automotive manufacturer with a market presence in many countries around the globe. The company’s growth investments are focused primarily on Japan, North America, and China, core markets with large profit pools in which Nissan has a meaningful market share. The company’s business in China is conducted through a joint venture with Dongfeng Motor Corporation.
- Nissan’s Sales Financing segment supports the sale of its vehicles by providing financing solutions to its customers and dealers. To enhance their creditworthiness, Nissan maintains keepwell (support) agreements with its wholly owned financial subsidiaries including Nissan Motor Acceptance Corporation (NMAC) in the United States and Nissan Financial Services (NFS) in Japan.
- The Renault-Nissan-Mitsubishi Alliance was established in 1999 to enhance member company scale in product development and raw material purchasing. The alliance includes equity participation, which led to Nissan holding ownership stakes in Renault (15% non-voting) and Mitsubishi (34%) and Renault holding an ownership stake in Nissan (43%). The Alliance’s automobile production volume is the third largest globally behind Toyota and Volkswagen.
Risk & Catalysts
AS OF 11 Mar 2026Management lowered FY25 retail sales and production volume outlooks by 1.5% and 3.0% due to weaker than expected performance in Japan and Europe, but maintained its North America forecast and raised its China forecast—its two biggest profit drivers.
Management initiated FY26 net loss guidance at ¥650 bn, predominantly from non-cash accounting changes, owing to the evolving tariff environment. Management expects positive automotive free cash flow in F4Q25 and F2H25, although full-year automotive free cash flow is expected negative.
Management raised its FY25 operating loss forecast from ¥(275) bn to ¥(60) bn driven by cost reduction actions and manufacturing efficiencies (¥105 bn improvement in Monozukuri initiatives), partially offset by weaker sales performance (-¥50 bn) and currency headwinds (¥80 bn).
Key Metric
AS OF 11 Mar 2026| JPY bn | FY21 | FY22 | FY23 | FY24 | LTM F3Q25 |
|---|---|---|---|---|---|
| Revenue | 7,393 | 9,573 | 11,524 | 11,371 | 10,776 |
| EBIT | (78) | 218 | 394 | (78) | (360) |
| EBIT Margin | (1%) | 2% | 3% | (1%) | (4%) |
| EBITDA | 211 | 535 | 745 | 286 | (77) |
| EBITDA Margin | 2.9% | 5.6% | 6.5% | 2.5% | (1.6%) |
| Total Liquidity | 3,601 | 3,658 | 4,196 | 4,272 | 2,749 |
| Net Debt | (728) | (1,213) | (1,546) | (1,498) | (959) |
| Total Debt | 973 | 687 | 468 | 661 | 1,191 |
| Gross Leverage | n/m | 1.3x | 0.6x | 2.3x | n/a |
| Net Leverage | -3.4x | -2.3x | -2.1x | -5.2x | 12.5x |
CreditSight View Comment
AS OF 11 Mar 2026We upgrade our recommendation on Nissan Motor and Nissan Motor Acceptance Co. notes from Market perform to Outperform based on relative value, the company’s weak but improving near-term automotive profit and free cash flow outlook, solid Re: Nissan cost savings execution, and improved retail sales trends in the US and China.
Recommendation Reviewed: March 11, 2026
Recommendation Changed: February 13, 2026
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Fundamental View
AS OF 17 Nov 2025Honda is only the second automaker in our coverage universe to lower full-year operating profit guidance this quarter. While Honda expects to benefit from a 14% reduction in anticipated tariff costs compared to last quarter, management acknowledged its plans to raise US vehicles prices to mitigate tariffs have been constrained by muted competitor pricing actions. The low historic profit margins and negative outlooks by S&P and Fitch increase the importance of Honda’s tariff mitigation strategies, which have thus far been vague and focused on increasing shifts at US plants, moving production of the Civic hybrid to the US, and securing more components locally.
Business Description
AS OF 17 Nov 2025- Honda Motor Co., Ltd. engages in the manufacture and sale of automobiles, motorcycles, and power products. It operates through the following segments: Automobile, Motorcycle, Financial Services, and Power Product and Other Businesses. The Automobile segment manufactures and sells automobiles and related accessories. The Motorcycle segment handles all-terrain vehicles, motorcycle business, and related parts. The Financial Services segment provides financial and insurance services. The Power Products and Other Businesses segment offers power products and relevant parts.
- American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Non-controlling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). Honda Motor Co. (HMC) maintains Keep Well (support) agreements with its North American finance subsidiaries, AHFC and HCFI. Under the Keep Well agreements, HMC agrees to (1) maintain at least 80% ownership in AHFC and HCFI, (2) ensure AHFC and HCFI maintain a positive net worth, and (3) ensure both AHFC and HCFI have sufficient liquidity to meet their debt payment obligations.
Risk & Catalysts
AS OF 17 Nov 2025Management affirmed its FY26 wholesale unit guidance for the Motorcycles and Power Products segments but lowered its Automobiles segment guidance by 8% to 3.34 mn units. The lower Automobile segment guidance reflects an anticipated 10% YoY decline compared to FY25.
The lower FY26 automobile volume guidance in Asia is broadly split between China and other Asia, which management attributed to increased competitiveness, especially from Chinese OEMs in China and other Asian countries. Management stated it needs to focus its attention on the profitable models, stabilize and then increase volumes, and enhance the profitability of its ICE and hybrid vehicles by rationalizing fixed costs.
Management lowered its FY26 consolidated operating profit forecast from ¥700 bn last quarter to ¥550 bn. The downward revision is driven by lower automobile volumes, weaker pricing expectations, partially offset by a smaller currency headwinds and lower tariff impacts. Full-year tariff impacts are now expected to total ¥385 bn (~US$2.5 bn), down from its ¥450 bn (~US$2.9 bn) estimate last quarter, based primarily on the parts tariff offset expansion.
Key Metric
AS OF 17 Nov 2025| JPY bn | FY22 | FY23 | FY24 | FY25 | LTM F2Q26 |
|---|---|---|---|---|---|
| Revenue | 11,967 | 14,167 | 17,434 | 18,509 | 18,478 |
| EBIT | 741 | 612 | 1,219 | 899 | 646 |
| EBIT Margin | 6.2% | 4.3% | 7.0% | 4.9% | 3.1% |
| EBITDA | 1,334 | 1,294 | 1,964 | 1,630 | 1,367 |
| EBITDA Margin | 11.1% | 9.1% | 11.3% | 8.8% | 7.0% |
| Total Liquidity | 4,612 | 4,926 | 6,150 | 5,368 | 5,579 |
| Net Debt | (2,481) | (2,751) | (3,762) | (3,216) | (3,054) |
| Total Debt | 837 | 803 | 863 | 646 | 1,018 |
| Gross Leverage | 0.6x | 0.6x | 0.4x | 0.4x | 0.7x |
| Net Leverage | -1.9x | -2.1x | -1.9x | -2.0x | -2.2x |
CreditSight View Comment
AS OF 10 Mar 2026We reiterate our Underperform recommendation on Honda Motor Co. and American Honda Finance Corporation notes based on relative value, its weak consolidated operating profit outlook, and concerns about restoring its automobile business to profitability over the intermediate term.
Recommendation Reviewed: March 10, 2026
Recommendation Changed: May 15, 2025
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Hyundai Motor
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Search topics about wealth insights and investments.Hyundai Motor
- Sector: Manufacturing
- Sub Sector: Automotive
- Country: Korea
- Bond: HYNMTR 5.4 31
- Indicative Yield-to-Maturity (YTM): 4.50%
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Fundamental View
AS OF 21 Aug 2025- While the profit headwind related to tariffs could become a rating event over time, we expect the rating agencies to maintain their patient stance on Hyundai based on its solid market position and healthy pre-tariff profit margins, giving the company time to implement and execute tariff mitigation strategies before contemplating negative rating actions. We note that Hyundai’s biggest mitigation strategy involving the ramp of its US-based Metaplant is already underway and should reduce its reliance on vehicle imports for the US market from 60% to 30% over time.
Business Description
AS OF 21 Aug 2025- Hyundai Motor Co., Ltd. engages in the manufacture and distribution of motor vehicles and parts. It operates through the following business areas: Vehicle, Financial and Other. The Vehicle division offers motor vehicles. The Financial division provides financing, leasing and credit cards. The Other division includes manufacture of railways. The company was founded on December 29, 1967, and is headquartered in Seoul, South Korea.
- Hyundai Capital America benefits from a support agreement with Hyundai Motor (HMC). HCA investor relations confirmed its support (keepwell) agreement contains a fixed charge coverage provision that it views as particularly strong compared to other peers.
Risk & Catalysts
AS OF 21 Aug 2025- On a combined basis, HMG’s current FY25 guidance targets FY25 wholesale unit growth of 2% to 7.4 mn units, revenue growth of 5% to 6%, and a consolidated operating profit margin of 8.8% at the midpoint of the range for YoY margin contraction of 40 bp. Kia management expects 2H25 vehicle demand in the US to decline 10% YoY, which will likely lead to a reduction in HMG’s FY25 wholesale unit target. Hyundai management stated it expects a bigger tariff impact in 3Q25 and 4Q25 than 2Q25, which we believe is likely due to a combination of vehicle tariffs being in effect for the entire quarter instead of just two months in 2Q25, along with lower volumes.
- HMG targets continued growth of NEVs in 2H25, including a target of 100% growth in HEV sales. Given the end of the US $7,500 NEV consumer tax incentive at the end of 3Q25 and expected reduced emissions standards in the US, the company plans to leverage its flexible production system for ICE and NEVs to adapt to potential demand changes. Management previously noted its Metaplant in Georgia, which was originally designed to manufacture EVs, was being retooled to also produce HEVs and could potentially produce ICE vehicles in the future.
Key Metric
AS OF 21 Aug 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Revenue | 94,143 | 113,718 | 130,150 | 136,725 | 141,518 |
| EBIT | 5,459 | 8,950 | 15,440 | 14,189 | 12,233 |
| EBIT Margin | 5.8% | 7.9% | 11.9% | 10.4% | 8.5% |
| EBITDA | 10,015 | 13,998 | 20,387 | 18,476 | 15,331 |
| EBITDA Margin | 10.6% | 12.3% | 15.7% | 13.5% | 8.5% |
| Total Liquidity | 19,745 | 26,639 | 26,507 | 27,488 | 22,776 |
| Net Debt | (5,202) | (11,035) | (10,916) | (11,799) | (17,730) |
| Total Debt | 12,569 | 12,940 | 12,940 | 12,940 | 5,805 |
| Gross Leverage | 1.3x | 0.9x | 0.6x | 0.7x | 0.4x |
| Net Leverage | -0.5x | -0.8x | -0.5x | -0.6x | -1.0x |
CreditSights View
AS OF 10 Mar 2026We reiterate our Market perform recommendation on Hyundai Motor Group (A3/A-/A-; S/S/S) notes based on relative value, the company’s solid global market position, our view that its low-A credit rating should be secure in the near term, its growing new energy vehicle business, tariff mitigation initiatives including vehicle onshoring in the US, and reduced tariff headwinds despite transitory headline risk.
Recommendation Reviewed: March 10, 2026
Recommendation Changed: November 04, 2025
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Fundamental View
AS OF 29 Feb 2024Toyota’s slower ramp of battery electric vehicle (BEV) production and sales relative to its peers was a common investor concern a year ago. However, with the recent slowdown in consumer adoption of BEVs in North America and Europe and Toyota’s dominance in the hybrid electric vehicle (HEV) market, those concerns have abated, at least for the time being. Importantly, Toyota management has indicated its profitability of its HEV portfolio is on par with its ICE portfolio profitability. We continue to believe that Toyota’s market leading position in HEVs provides consumers with a more eco-friendly option than traditional ICE vehicles that can serve as a bridge to EVs while the charging infrastructure is built out and the cost of producing EVs is reduced.
Business Description
AS OF 29 Feb 2024- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan. In July 2000, the company established Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary, to oversee the management of its finance companies worldwide.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States and is an indirect wholly owned subsidiary. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 29 Feb 2024Toyota Motor Credit Corporation (TMCC) credit metrics stable. TMCC F3Q24 earnings before taxes increased 50% YoY and 3x sequentially. At F3Q24 the delinquency rate expanded 10 bp YoY to 0.9%, nearly double pre-pandemic levels, while the retail charge-off rate expanded 10bp YoY to 0.7%. The company notes that changes in interest rates or unemployment could increase credit losses and additional provisioning. Additionally, elevated prices and high borrowing costs have impacted some consumers’ ability to make scheduled payments resulting in an increase in consumer delinquencies and charge-offs.
Key Metric
AS OF 29 Feb 2024| ¥ bn | FY20 | FY21 | FY22 | FY23 | F3Q24 |
|---|---|---|---|---|---|
| Total Company Earning Assets | 110,621 | 116,546 | 117,659 | 120,018 | 129,320 |
| Cash and Investments | 6,790 | 8,195 | 7,670 | 6,398 | 6,458 |
| Total Liquidity | 31,390 | 35,895 | 36,070 | 33,498 | 35,058 |
| Unsecured Debt | 83,172 | 85,513 | 82,288 | 78,949 | 85,744 |
| Secured Debt | 14,568 | 24,212 | 26,864 | 32,736 | 33,262 |
| Total Debt | 97,740 | 109,725 | 109,152 | 111,685 | 119,006 |
| Allowance % Retail Rece. | 0.86% | 1.64% | 1.66% | 1.83% | 1.81% |
| Allowance / Net Charge-offs | 1.58x | 4.50x | 6.68x | 3.03x | 2.56x |
| Net Charge-offs % Avg. Receivable | 0.56% | 0.39% | 0.26% | 0.63% | 0.72% |
| 30+ Day Delinquency Rate | 1.8% | 1.2% | 1.8% | 2.3% | 3.1% |
CreditSight View Comment
AS OF 13 May 2024We reiterate our Underperform recommendations on notes of Toyota Motor Co. (TOYOTA: A1/A+/A+; S/S/S) and Toyota Motor Credit Corporation (TMCC: A1/A+/A+; S/S/S) based primarily on relative value. Toyota reported record profit in FY24 and announced increased investments in labor, suppliers, and BEVs in FY25 that it expects to reduce operating profit 20%. We applaud the investments that we believe should further its new energy vehicle offerings well beyond its hybrid electric vehicles (HEVs), which account for more than one-third of its sales. We believe the Toyota bond complex is fairly valued at current levels but will continue to underperform the broader market and the A-rated index owing to its high-A credit rating and short duration.
Recommendation Reviewed: May 13, 2024
Recommendation Changed: January 13, 2023
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