JPM expects price hikes and cut in some production-related expenses to mitigate 80% to 90% of the rise in Japanese original equipment manufacturers' (OEMs) raw material costs per vehicle, which it estimates will rise by an average of 95,000 yen ($742.88) in fiscal 2022.
"We think product price hikes are likely to go through in North America in particular, backed not only by solid demand but also the Japanese OEMs' brand positions," JPM analysts said.
The brokerage also upgraded Japanese auto industry's bellwether, Toyota Motor Corp, to "overweight" from "neutral", citing its production recovery, price positioning, among other things, amid concerns that inflation could eat into the company's earnings.
Japan's largest automaker by sales on Friday cut its global production plan for June for the second time this month and signaled its full-year output estimate could be lowered, highlighting the pain from the supply chain crunch and China lockdown.
Besides high commodity prices, global auto production has also suffered from semiconductor shortages and China's COVID-19 lockdowns, with car sales in China, Europe and the United States remaining depressed compared with a year earlier.
The brokerage forecast 2022 global automobile demand of 84.5 million units, with Japanese OEMs global production at 24.3 million.
($1 = 127.8800 yen)
(Reporting by Siddarth S in Bengaluru; Editing by Vinay Dwivedi)
