Citi On Autos: Factoring In Changes In Forex, Downgrades Toyota, Mazda

The recent strength of the yen versus European currencies has impacted the competitiveness of Japan-made vehicles “by more than the fall in profits via forex sensitivity,” Citi’s Arifumi Yoshida said in a report. He downgraded the ratings on Toyota Motor Corp TM and Mazda Motor Corp MZDAF from Buy to Neutral.

“We no longer think non-forex fundamentals are favorable, and factor in fundamentals deterioration,” analyst Yoshida wrote.


The price target has been reduced from ¥6,300 to ¥6,000. Yoshida believes that the yen strength would have a negative impact on the premium Lexus segment, which is mainly manufactured in Japan.

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Although Toyota does have the ability to cope with “a long-term paradigm shift in the auto industry,” there does not seem to be any near-term undervaluation. The analyst added, “Up ahead, C-HR and Camry appeal and sales (measures of TNGA competitiveness) could hold the key to a re-rating.”


The price target has been reduced from ¥2,500 to ¥1,600. Mazda has substantial exposure to Europe, and has a high ratio of exports from Japan. “We fear benefits from the extra supply capacity for the CX series created by domestic production rearrangements will be offset by lower competitiveness stemming from yen strength,” Yoshida commented.

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