Japanese autos, auto parts and tire sectors: J.P. Morgan favors selected Japanese autos, tire makers and Nifco as resilient demand and company-specific positioning offset cost and competition pressures.
The report sees raw-material inflation as increasingly reflected in FY2026 guidance, while resilient US demand, hybrid adoption and India growth create opportunities for selected Japanese manufacturers. It remains cautious on China-linked competition and US tire-market margin pressure.
Summary
The report sees raw-material inflation as increasingly reflected in FY2026 guidance, while resilient US demand, hybrid adoption and India growth create opportunities for selected Japanese manufacturers. It remains cautious on China-linked competition and US tire-market margin pressure.
- Recommended Overweight names are Suzuki Motor, Isuzu Motors, Toyota Motor, Bridgestone, Yokohama Rubber and Nifco.
- Mitsubishi Motors, SUBARU, Denso and TS Tech are designated Underweight.
- J.P. Morgan estimates sector-wide FY2026 raw-material costs of about ¥1.8 trillion, or roughly ¥90,000 per vehicle.
- US auto SAAR was above 16.6 million units through August, with hybrid adoption and trade-down demand seen as supportive.
- China vehicle exports are on a pace to exceed 10 million units in 2026 despite about a 20% year-on-year decline in domestic demand.
- US tire spreads are expected to narrow gradually from 3Q FY2026 as Tier 2 competition intensifies.
Report Interpretation
Overview
This sector call examines Japanese autos, auto parts and tire makers from the second half of 2026 onward. J.P. Morgan’s preference is for selected companies with exposure to resilient US demand, hybrids, India growth, or differentiated tire and component positioning, while it highlights substantial input-cost, China-competition and tire-margin risks.
Core views
J.P. Morgan ranks autos ahead of tires and auto parts and identifies Suzuki Motor, Isuzu Motors and Toyota Motor as its preferred automakers; Bridgestone and Yokohama Rubber as preferred tire makers; and Nifco as its preferred auto-parts name. Mitsubishi Motors and SUBARU are the least favored automakers, while Denso and TS Tech are the least favored auto-parts names. The report’s selection is not based on a uniform sector view: it distinguishes companies by their market exposures, pricing power and ability to benefit from changing vehicle demand. Higher commodity prices, semiconductor costs and energy costs are expected to lift FY2026 raw-material costs across the autos sector by about ¥1.8 trillion, equivalent to roughly ¥90,000 per vehicle. J.P. Morgan notes that the burden is large but increasingly appears adequately reflected in company guidance. Its company-level estimates show total FY2026 raw-material impacts of ¥1,215 billion for Toyota, ¥483 billion for Honda, ¥240 billion for Suzuki, ¥150 billion for Nissan, ¥130 billion for SUBARU, ¥79 billion for Mitsubishi and ¥74 billion for Mazda. The analytical issue is therefore whether companies can pass through cost inflation and protect profits rather than whether cost pressure exists. The US demand backdrop is more resilient than expected. US auto SAAR was running above 16.6 million units through August, ahead of the prior year despite higher raw-material costs and elevated gasoline prices; used-car prices were also trending higher. J.P. Morgan sees faster HEV adoption and a trade-down in demand from trucks toward sedans and compact SUVs as potential opportunities for Japanese automakers, whose product positioning may be better aligned with those trends. India is another source of support. J.P. Morgan expects the Indian auto market to grow 6.6% year on year in 2026 after the GST effect had largely run its course. It highlights MSIL’s attempt to improve its mid-size SUV position, an area where it had previously lagged, alongside plans to build 4 million units of production capacity in India and restore market share to 50%. China is a more complex competitive issue. Domestic Chinese auto demand is running at about a 20% year-on-year decline, while exports are accelerating to offset the weakness and are on a pace to exceed 10 million vehicles in 2026. Most BEV exports are headed to Europe and ASEAN, with ASEAN volumes rising sharply. Thailand’s BEV penetration temporarily reached 40%; Toyota has so far maintained its share, but J.P. Morgan is monitoring whether ASEAN governments become more open to imports of Chinese vehicles. The report also flags intensifying Chinese domestic competition and autonomous-driving competition, including NOA, as issues for Japanese automakers and parts suppliers. For tire makers, higher tariffs and raw-material costs have pushed US tire CPI to record levels since FY2025. However, J.P. Morgan is not optimistic about competitive conditions because Tier 2 brands are gaining intensity in the core US market. It expects tire spreads—defined as year-on-year revenue less raw-material and maritime-freight costs—to narrow gradually from 3Q FY2026. Profitability will depend on the effectiveness of multi-brand strategies and the degree to which companies capture benefits from earlier structural reforms. The report also directs attention to Bridgestone’s and Yokohama Rubber’s medium-term plans beginning in FY2027.
Analysis framework
J.P. Morgan compares subsectors and individual covered stocks, then assesses cost inflation, demand conditions, regional market shifts and competitive positioning. It uses company data and its own estimates for raw-material exposure, shipment volumes, quarterly earnings, valuation metrics and tire spreads, while evaluating how pricing and product mix can transmit industry changes into profits.
Methodology notes
Regional vehicle demand and export supply analysis
The report evaluates US demand, Indian market growth, weaker Chinese domestic demand and accelerating Chinese exports to explain regional opportunities and competitive pressure.
Raw-material cost pass-through
J.P. Morgan traces commodity, semiconductor and energy-cost increases into vehicle costs, guidance and replacement-tire pricing, with profitability depending on companies’ ability to pass through those costs.
Tire-spread analysis
The report defines tire spread as year-on-year revenue net of raw-material and maritime-freight costs, using it to assess pricing versus cost pressure and expected margin changes.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Suzuki Motor (7269)Recommended automaker with Overweight rating.
- Strengths
- Positioned for Japanese automaker opportunities from HEV adoption and trade-down demand.
- Weaknesses
- Subject to raw-material cost pressure.
- Comparison
- Preferred over Mitsubishi Motors and SUBARU, which are Underweight.
- Risks
- Raw-material inflation and regional competitive conditions.
- Isuzu Motors (7202)Recommended automaker with Overweight rating.
- Strengths
- Included among J.P. Morgan’s core stock calls.
- Comparison
- Preferred within the autos subsector.
- Risks
- Raw-material inflation and market-demand changes.
- Toyota Motor (7203)Recommended automaker with Overweight rating.
- Strengths
- J.P. Morgan sees opportunities from resilient US demand, HEV adoption and trade-down trends; Toyota has so far maintained market share in Thailand.
- Weaknesses
- Estimated total FY2026 raw-material impact is ¥1,215 billion.
- Comparison
- Preferred over Mitsubishi Motors and SUBARU.
- Risks
- China export competition in ASEAN and Europe, as well as input-cost pressure.
- Bridgestone (5108)Recommended tire maker with Overweight rating.
- Strengths
- Included among J.P. Morgan’s preferred tire names and subject to FY2027 medium-term-plan evaluation.
- Weaknesses
- US tire spreads are expected to narrow gradually from 3Q FY2026.
- Comparison
- Preferred over neutral-rated Toyo Tire and Sumitomo Rubber Industries.
- Risks
- Higher oil and rubber costs and intensifying US competition from Tier 2 brands.
- Yokohama Rubber (5101)Recommended tire maker with Overweight rating.
- Strengths
- Included among J.P. Morgan’s preferred tire names and subject to FY2027 medium-term-plan evaluation.
- Weaknesses
- US tire-market competitive conditions remain challenging.
- Comparison
- Preferred over neutral-rated Toyo Tire and Sumitomo Rubber Industries.
- Risks
- Ability to pass through rising raw-material costs and narrowing tire spreads.
- Nifco (7988)Recommended auto-parts supplier with Overweight rating.
- Strengths
- J.P. Morgan’s sole recommended auto-parts name.
- Comparison
- Preferred over Underweight-rated Denso and TS Tech.
- Risks
- Input-cost pressure and changes in automaker production demand.
- Mitsubishi Motors (7211)Not recommended automaker with Underweight rating.
- Weaknesses
- Placed among J.P. Morgan’s least favored autos names.
- Comparison
- Less favored than Suzuki Motor, Isuzu Motors and Toyota Motor.
- Risks
- Raw-material inflation and regional competitive conditions.
- SUBARU (7270)Not recommended automaker with Underweight rating.
- Weaknesses
- Placed among J.P. Morgan’s least favored autos names.
- Comparison
- Less favored than Suzuki Motor, Isuzu Motors and Toyota Motor.
- Risks
- Raw-material inflation and regional competitive conditions.
- Denso (6902)Not recommended auto-parts supplier with Underweight rating.
- Weaknesses
- Placed among J.P. Morgan’s least favored auto-parts names.
- Comparison
- Less favored than Nifco.
- Risks
- Competitive pressure and automaker production trends.
- TS Tech (7313)Not recommended auto-parts supplier with Underweight rating.
- Weaknesses
- Placed among J.P. Morgan’s least favored auto-parts names.
- Comparison
- Less favored than Nifco.
- Risks
- Competitive pressure and automaker production trends.
Key data
- FY2026 autos-sector raw-material cost impactAround ¥1.8 trillionJ.P. Morgan estimate across the autos sector.
- Raw-material cost increase per vehicleRoughly ¥90,000 per unitSector-wide FY2026 estimate.
- US auto SAARAbove 16.6 million units through AugustDemand was tracking ahead of the prior year.
- India auto-market growth forecast+6.6% YoY in 2026J.P. Morgan expects continued strength after GST effects largely ran their course.
- China domestic auto demandAbout -20% YoYDomestic weakness is being offset by surging exports.
- China vehicle exportsPace exceeding 10 million units in 2026BEV exports are predominantly directed to Europe and ASEAN.
- Thailand BEV penetrationTemporarily reached 40%Cited as evidence of rapid BEV-market change in ASEAN.
- Tire-spread outlookGradual narrowing from 3Q FY2026Driven by intensifying Tier 2-brand competition in the US market.
Impact & implications
The report argues that sector performance will diverge by company rather than move uniformly with the auto cycle. Companies able to capture hybrid, compact-vehicle, India or selected export-market opportunities and manage input costs are preferred, whereas exposure to competitive disruption or weaker profit dynamics supports a more cautious stance. Tire profitability is particularly dependent on pricing discipline, brand strategy and realized structural-reform benefits.
Risks
- Raw-material, semiconductor and energy-cost inflation could exceed company assumptions or prove harder to pass through.
- Chinese vehicle exports could increase competitive pressure in ASEAN and European markets, with differing effects by manufacturer.
- Autonomous-driving competition, including NOA, may affect Japanese automakers and parts suppliers.
- US tire competition from Tier 2 brands may narrow tire spreads and constrain profitability.
What to watch
- The ability of automakers and tire makers to pass higher input costs into prices and guidance.
- US demand resilience, HEV adoption and the shift toward sedans and compact SUVs.
- China’s export pace and the policy stance of ASEAN governments toward Chinese vehicle imports.
- Competitive developments in China’s auto market and autonomous-driving technology.
- Bridgestone’s and Yokohama Rubber’s FY2027 medium-term plans.