YOKOHAMA, Japan (Reuters) -- Nissan Motor Co. will find it hard to increase its profit further in the next business year if the yen remains at its strong levels, even if the firm can expand its sales volumes, a top executive said.
"We're still working on our projections for next year, but it would be very difficult to see profits continuing their rise with the dollar at 80 yen," Chief Operating Officer Toshiyuki Shiga told reporters on the sidelines of the APEC CEO summit on Saturday.
The yen's rise to 15-year highs against the dollar has pressured profitability at Japanese automakers, compounding the stiffer competition against South Korea's Hyundai Motor Co. which has been aided by a relatively weak won currency. Shiga noted that despite improved sales, the profit margin at Japan's third-biggest automaker was expected to more than halve to 3.4 percent in the October-March second half of this business year given the tougher exchange rate assumption of 80 yen to the dollar versus 89 yen in the first half.
Among Japan's top automakers, Nissan, owned 43 percent by Renault SA, is taking the most aggressive short-term steps to offset currency losses, including by procuring more components locally for vehicles built outside Japan, and using more imported parts for cars produced in Japan.
To become more competitive, Shiga said Nissan wanted to boost the portion of imported parts for its Japan-made vehicles to around 40 percent. The current ratio for its small cars, which have the highest ratio of imported parts, was between 20-29 percent, he said.
Still, Shiga said he hoped that the yen would start easing towards what the Japanese auto industry considered a "weaker yen," of beyond 90-100 yen to the dollar, towards the end of next year as the U.S. economy recovers.
"I think it would be difficult to see the yen falling during the first half of the year," he said.
While remaining cautious, Shiga said he was hopeful that the U.S. Federal Reserve's second round of quantitative easing, worth $600 billion, would sustain a fragile economic recovery and act as a booster for the global economy.
He noted that U.S. vehicle sales were strong in October -- the best monthly rate this year -- and said he was encouraged by news of improving personal consumption in the world's second-biggest auto market.
Separately, Shiga said a decision over producing pure electric cars in China was still under study, denying some recent local media reports that Nissan's 50-50 joint venture with China's Dongfeng Motor Group had decided to start production in 2013.