Autos: Externals Tough, but Attractive Valuations Giving Some Support

Morgan Stanley MUFG rates the Japanese autos industry In-Line. Higher gas prices are driving growing HEV demand in regions with limited competition from Chinese OEMs (e.g., the US), providing a tailwind for some Japanese OEMs. However, competition with Chinese OEMs is intensifying (sluggish China demand and rising Chinese exports pressuring ASEAN and Australia), raw material prices remain high, and structural risks persist from the investment burden for electrification/software. Since the Middle East situation deteriorated in late February, many names have underperformed TOPIX by over 20%;