Japanese motor manufacturer geared up for high margin automotive industry

‘Everything that spins or moves’ roughly outlines the philosophy behind Nidec, a global electric motor manufacturer that once dominated the markets for its products. The Japan-based business is expanding aggressively and seeking to replicate its dominance in the evolving automotive sector.

Nidec specialises in the development, manufacturing and sales of small precision motors, automotive motors, home appliance motors, commercial and industrial motors, motors for machinery, electronic and optical components.
“If you have used an ATM cash machine you are likely to have experienced a Nidec electric motor,” says Roscoe Widdup, Portfolio Manager at Triple Eight Capital whose wholesale T8 Energy Vision fund focusses on equities dedicated to clean energy and solutions to the world’s net zero emissions targets.

Speaking on Reach Markets’ The Insider: Meet the Fund Manager in May 2023, Mr Widdup chose Nidec Corp (JT: 6594) as one of his favourite stocks for its role in clean energy – a sector he backs as the next big disruptor and one he believes will eclipse even the tech boom. Watch the full The Insider: Meet the Fund Manager session.

Nidec began its journey as Nippon Densan Corporation in July 1973 in a small shed with four employees, founded by its current Chairman of the Board and CEO, Shigenobu Nagamori. It had a market cap of JP¥20 million (AU$211,000), producing and selling small precision AC motors.

Over the next decade, the business started growing its global footprint, establishing multiple manufacturing plants in Japan, sales agents in the US, Asia and Europe, as well as US-incorporated companies Nidec America Corp and Nidec Torin Corp.

Since 1984, Nidec has expanded aggressively, swooping in and completing more than 70 mergers and acquisitions of global companies among the likes of Power General Corporation (USA), FUJISOKU, SANYO Seimitsu, Secop Group (Germany), OMRON Automotive Electronics and Roboteq, Inc. (USA).

“They had [an] 80-90% market share in some of the most prolific electric motor markets that have existed over the decades,” Mr Widdup said. As at 18th July 2023, the business was valued at more than JP¥4 trillion (roughly AU$40 billion).

“Nidec had never had a market the size and the scale of the automotive industry,” he said, indicating that the business is targeting a 40-50% market share of the global market sector – estimated to be worth ~US$3 trillion (12th July 2023). “…a much lower market share than what [Nidec] has experienced historically, [but] this comes with the scale and the potential margin which is simply extraordinary.

Click here to view more videos from Roscoe Widdup’s The Insider: Meet the Fund Manager session.

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