TOKYO: Japan's Denso Corp is gunning for the title of top-selling automotive parts supplier by stoking its electrification push with a bond sale and setting aside hundreds of billions of yen for deals.
Denso, the world's No. 2 automotive parts supplier in terms of sales, plans to roughly double revenue from electrified parts to 1 trillion yen (RM39bil) by fiscal 2025. It aims to double that figure again by fiscal 2030, chief financial officer Yasushi Matsui said in an interview.
Matsui sees EV parts as a key value generator, capable of pushing Denso above the current top-selling automotive parts maker, Germany's Robert Bosch GmbH.
"The arena they'll chase behind us in is electrification," Matsui said. "After all, we've been in that field for a long time."
Indeed, Denso entered the EV parts arena earlier than many others, making various components for the world's first mass-produced hybrid passenger car - Toyota Motor's Prius - since the 1990s. Today, it claims roughly one-third of the market for inverters, a critical part that converts currents from batteries in battery-electric and hybrid cars.
Denso gets about half of its revenue from Toyota, with the rest coming from a range of automakers from Honda Motor to Ford Motor and Stellantis.
Matsui says two decades of experience making hybrid-car parts for Toyota gives Denso an edge with EV parts today. Some key EV components like inverters can be manufactured on existing hybrid part factory lines, giving Denso a headstart in preparing facilities and building scale, he said.
According to Matsui, over the next five to six years, Denso plans to deploy around 1 trillion yen - half of which may be spent on shareholder returns like share buybacks, and half on mergers and acquisitions in fields such as electrification.
The Japanese company is considering a sustainability bond offering that would enable it to raise capital for initiatives that contribute to the environment and society, according to Denso senior director Yoshimasa Shinoda.
Denso has a relatively high equity ratio that it's looking to decrease, Matsui said, adding that Denso will also look to sell several smaller businesses such as those tied to gasoline-only cars.
Expectations of growth are creating a certain level of buzz from investors. Denso's shares have risen more than 70 per cent over the past year, giving the company a market capitalisation that rivals Honda and Ford. They touched a record high in June.
In the near term, Denso is facing the same headwinds buffeting its top customer. Just as demand skyrockets for cars, rising Covid-19 cases in South-east Asia and the industry-wide chip shortage are dragging on production.
Demand for hybrids - and cars in general - is quite strong right now, Matsui said. Compared to its recent outlook for a 440 billion yen profit, "500 billion yen is not a dream."
