Business and Other Risks
Among the items described in the securities report regarding the business conditions, accounting situation, and other matters, the main risks that could significantly affect the financial position, operating results, and cash flow of the Group are as follows. The Group recognizes the possibility of these risks occurring and manages them accordingly, while also taking measures to minimize losses should these risks materialize. The forward-looking statements in this section reflect the Group’s judgment as of the submission date of this securities report and may not cover all potential risks that could arise in the future.
(1) Risks Related to Economic Conditions
More than 80% of the Group’s consolidated sales come from the mobility business, which manufactures and sells products whose demand is influenced by the economic conditions of the countries or regions where they are sold. A recession in key markets such as Japan, China, India, Southeast Asia, North America, and Europe, and a resulting decline in demand, could have a negative impact on the Group’s operating results and financial position.
(2) Risks Related to Exchange Rates, Interest Rates, and Financial Market Fluctuations
The Group operates not only in Japan but also in North America, Europe, and Asia. As such, fluctuations in exchange rates and interest rates in these countries and regions could affect demand for the Group’s products, as well as transaction prices, purchase costs, and financial expenses, impacting the Group’s operating results and financial position. Moreover, while overseas subsidiaries prepare financial statements in local currencies, these statements are translated into yen for the consolidated financial statements. Consequently, even if there are no fluctuations in the local currencies, the exchange rate used for conversion could influence the yen-denominated values.
(3) Risks Related to Laws and Regulations
The core of the Group’s operations is the mobility business, which manufactures and sells fuel supply devices for four-wheel vehicles, two-wheel vehicles, and general-purpose engines, as well as engine-related components. Therefore, the Group is subject to various laws and regulations, such as emission regulations for automobiles, fuel efficiency regulations, and pollution control regulations for factory emissions, both in Japan and in the countries where it operates. Unexpected changes to these laws and regulations could affect the Group’s development, production, and sales activities, and have an impact on its operating results and financial position. Additionally, new regulations related to the decarbonization trend, such as restrictions on the sale of new internal combustion engine vehicles, could also affect the Group.
(4) Risks Related to Procurement of Raw Materials and Components, and Price Fluctuations
The Group procures the raw materials and components necessary for manufacturing products both domestically and internationally. While efforts are made to secure stable procurement through multiple suppliers and alternative materials, geopolitical risks and imbalances in supply and demand could lead to soaring material prices or procurement difficulties. These factors could impact the Group’s operating results and financial position. The Group strives to appropriately pass on cost increases through price adjustments.
(5) Risks Related to Product Quality
Although the Group prioritizes quality in the design, production, and sale of its products, there is a risk that defects may arise due to unforeseen causes. Product defects could increase warranty-related costs and undermine the trust in the quality of the Group's products, potentially leading to reduced demand. To address this, the Group is committed to ensuring product quality by raising awareness of quality issues and implementing systems to oversee the entire process from procurement to production, logistics, and sales.
(6) Risks Related to Competition
The Group’s business is affected by the production conditions of competitors, including other component manufacturers and customers. In the core mobility business, the advancement of powertrain electrification and diversification of energy sources is expected to increase in the future, and opportunities for new entrants from other industries into the automotive sector are increasing. If structural changes in the industry or competition progress faster than anticipated, it could impact the Group’s operating results and financial position.
(7) Risks Related to Natural Disasters and Infectious Diseases
Natural disasters such as earthquakes and typhoons could cause damage to the Group’s supply chain, including suppliers and procurement partners. Additionally, many of the Group’s domestic facilities are located in regions vulnerable to major earthquakes, such as the Tokai Earthquake and urban near-source earthquakes. In the event of a large-scale disaster, the Group’s manufacturing and sales activities could be significantly disrupted, impacting the Group’s operating results and financial position. The Group is working to strengthen the seismic resistance of its manufacturing plants, conduct disaster preparedness training, and establish disaster recovery manuals. Furthermore, the Group’s manufacturing and sales activities could be affected by global pandemics of new infectious diseases.
(8) Risks Related to Global Business Expansion
The countries and regions where the Group operates may face various risks, including the following. While the Group is taking appropriate measures to address these risks, should any of these events occur, they could affect the Group’s operating results and financial position:
- Outbreak of conflicts
- Disputes arising from differences in labor conditions
- Risks from terrorist attacks, including cyberterrorism, wars, or fiscal crises
- Infringement of intellectual property rights owned by the Group, such as counterfeit products
- Unexpected litigation risks