Toyota Supplier Sees China Sales Doubling on VW to GM Orders

Jan 29, 2014 1:29 am ET

(Updates with closing share price in fifth paragraph.)

Jan. 29 (Bloomberg) -- Tsubakimoto Chain Co., a Toyota Motor Corp. supplier, forecasts China auto parts sales to more than double in four years as carmakers including Volkswagen AG and General Motors Co. raise orders to diversify supply chains.

The maker of transmission chains and gears expects sales to jump to more than 12 billion yen ($116 million) by March 2018, Toru Fujiwara, managing executive officer, said in a Jan. 27 interview. The board has approved plans for a new plant in China as early as this year, he said.

Tsubakimoto Chain plans to expand in China, where its auto parts sales are projected to reach 6 billion yen this fiscal year, fueled by GM and VW racing to become the No. 1 carmaker in the world’s biggest auto market. As the Germany and U.S.-based carmakers compete in China, they are diversifying orders to reduce the risk of having just one supplier for each part, Fujiwara said.

“That would be a tailwind for us,” Fujiwara said in Osaka, Japan, where the company is based.

Tsubakimoto Chain, which also makes conveyor belts, rose 3.8 percent, its biggest gain in more than a month, to 853 yen at the 3 p.m. close of Tokyo trading. The stock climbed 66 percent last year, compared with a 57 percent gain for the Nikkei 225 Stock Average.

Net income will probably jump 25 percent to 9.3 billion yen for the year ending in March, according to the average of seven analyst estimates compiled by Bloomberg. Sales may climb 15 percent to 173 billion yen, the estimates show.

Carmakers Boom

VW has said it will add seven car plants in China and increase production capacity there to 4 million vehicles a year by 2018. GM plans to invest $11 billion in China by 2016 and add four plants that will boost annual capacity to about 5 million units.

“As a global operating company we work together with global operating suppliers,” Larissa Braun, a spokeswoman for VW Group China in Beijing, said in e-mailed comments. “To secure globally stable and efficient supplier chains we cooperate with the most competitive and cost efficient supplier markets to improve continuously our costs.”

Dayna Hart, a spokeswoman with GM in Shanghai, didn’t immediately respond to an e-mail sent after office hours in China.

Orders from Japanese automakers in China led by Toyota are also expected to rise, Fujiwara said. Demand for Japanese vehicles in China has recovered from a consumer backlash stemming from a territorial dispute between the two countries over a group of islands.

Fujiwara said U.S. sales of auto parts will probably reach 17.5 billion yen in the year ending March 2014, then expand about 15 percent by March 2017. The company may have to consider adding capacity at its plant in Tennessee or building a new factory in the next three years, he said.

North America accounted for about 17 percent of Tsubakimoto Chain’s total revenue last fiscal year, according to data compiled by Bloomberg.

--Editors: Suresh Seshadri, Dave McCombs