Nidec's Waning Profitability and Accounting Scrutiny: A Looming Crisis for the EV Supply Chain

The Japanese electric motor giant Nidec Corporation, once a cornerstone of the global EV supply chain, now faces a perfect storm of margin compression and governance risks that threaten its long-term viability. As the company grapples with a historic accounting scandal and a 99.4 billion yen operating profit decline in Q2 2025, investors and partners are left to assess whether Nidec can navigate these challenges without destabilizing its critical role in the EV ecosystem.

Margin Compression: A Symptom of Systemic Strain

Nidec's financial performance in 2023–2025 reveals a stark erosion of profitability. For the first half of fiscal 2025, operating profit plummeted 82.5% year-on-year to 21.1 billion yen, with margins collapsing from 9.3% to 1.6% according to Q2 2025 financial data. This decline was driven by a 99.4 billion yen hit to its Automotive products segment, stemming from provisions for loss on onerous contracts (36.5 billion yen), impairment losses (31.7 billion yen), and settlement costs for supplier claims (19.5 billion yen) as reported in financial filings. These figures underscore a sector-wide trend: margin compression in the EV supply chain, exacerbated by delayed supplier payments, rising tariffs, and inflationary pressures according to industry analysis.

While Nidec's EV-related segments-such as e-bike motors and traction systems-showed 9.8% year-on-year revenue growth in Q4 2025 according to BCG analysis, the company's broader automotive business is under siege. Analysts note that Nidec's third-generation E-Axle models, designed for cost efficiency and high profitability, may not offset the financial drag from governance-related costs as outlined in corporate sustainability reports. The company's withdrawal of its year-end forecast and suspension of dividend payments further signal a loss of confidence in its ability to stabilize margins as detailed in corporate communications.

Accounting Scandal and Governance Failures: A Trust Deficit

Nidec's accounting practices have drawn unprecedented scrutiny. In July 2025, PwC Japan-a subsidiary of the global audit firm-withheld an opinion on Nidec's consolidated financial statements for fiscal 2025 due to insufficient audit evidence according to Reuters reporting. This followed a third-party investigation into suspected improper transactions, including a ¥200 million payment at a Zhejiang subsidiary and errors in country-of-origin declarations at an Italian plant as reported by Bloomberg. The Tokyo Stock Exchange placed Nidec on a "special alert" in October 2025, citing urgent needs for internal control improvements as stated in corporate announcements.

The fallout has been severe.
Nidec's shares dropped 22% in a single day following the announcement of the third-party investigation according to market data, reflecting investor fears of systemic governance failures. The company's founder, Shigenobu Nagamori, whose leadership has historically defined its success, now faces questions about succession planning and corporate culture as detailed in corporate governance materials. While Nidec has established a Corporate Reform Committee and revised its governance framework, these measures may not address deep-seated issues in its compliance culture.

Ripple Effects on the EV Supply Chain

Nidec's governance and financial instability pose systemic risks for the EV supply chain. As a key supplier of precision motors, its partners-including automakers and EV startups-rely on its financial transparency and operational reliability. The company's material weakness in internal controls-such as the underreporting of unpaid tariffs due to incorrect country-of-origin declarations as reported in risk disclosures-raises concerns about its ability to meet the stringent compliance demands of global automotive clients.

Moreover, Nidec's expansion into India's EV market, exemplified by its $55 million Orchard Hub plant in Karnataka according to supply chain analysis, highlights its strategic ambition but also exposes it to sector-wide volatility. Broader industry trends, such as delayed supplier payments and rising tariffs as documented in industry reports, suggest that Nidec's partners may face similar margin pressures. For instance, its Mexican subsidiary, Nidec Tosok de Mexico, experienced a peak default probability of 0.889 in July 2022 due to supply chain disruptions, though it improved to 0.367 by December 2025 according to research findings. This volatility underscores the fragility of the EV supply chain in the face of macroeconomic headwinds.

Conclusion: A Test of Resilience

Nidec's challenges are emblematic of the broader risks facing the EV supply chain in 2025. While its technological innovations-such as third-generation E-Axle models-position it to capitalize on the EV boom, its governance failures and margin compression threaten to undermine investor and partner confidence. The company's ability to restore trust will hinge on its success in implementing structural reforms, strengthening internal controls, and demonstrating financial transparency.

For investors, the stakes are high. Nidec's stock remains a high-risk bet, with its special alert status and auditor disclaimers casting a long shadow over its prospects. Meanwhile, EV supply chain partners must weigh the benefits of Nidec's technological expertise against the risks of its financial instability. In an industry defined by rapid innovation and razor-thin margins, Nidec's next moves could determine whether it remains a leader-or becomes a cautionary tale.