Nissan is in some deep trouble right now, and it doesn’t look like it’s going to get better anytime soon. Late last week, the Japanese automaker put out some very disappointing global sales numbers, and now some are worried it’ll once again fall short of its fiscal year profit forecast. Of course, this was already cut once before back in July.
Nissan’s worldwide sales tumbled 5.5 percent in August, and that marked Nissan’s fifth consecutive monthly decline, according to Bloomberg. Its two biggest problem areas just happened to be China and the U.S., which is unfortunate because Nissan relies on those two countries alone for about half of its global sales volume. In fact, Nissan’s U.S. dealerships are earning about 70 percent less than they were at the same time last year.
Here’s what’s going on in those two countries and why two completely different issues are leading to Nissan’s financial hardships. From Bloomberg:
In China, sales slumped 24% — bad, but arguably not much of a surprise given Nissan is closing a plant and cutting production capacity after years of deteriorating performance. The company is having a hard time keeping up with local carmakers offering electric vehicles loaded with high-tech features that appeal to Chinese consumers.
In the US — where Chinese cars are scarcely available due to tariffs — Nissan is facing an altogether different issue. The company doesn’t have any hybrid models at a time gas-electric models are in vogue. Sales slipped 0.1%, the first monthly decrease since April.
The dip came despite Nissan’s efforts to tame inventory in North America by increasing incentive spending. CEO Makoto Uchida said in July his focus was on clearing the stock of cars on dealer lots, which doesn’t seem to be going so well.
As I mentioned earlier, Nissan’s U.S. dealers have seen a 70 percent decrease in profits over the last year, and that comes despite the fact the company is spending a ton of money on advertising and incentives, Bloomberg reports. Many Nissan dealers are having trouble even moving 2023 models. It’s not a good situation.
“To clear the inventory, Nissan will either have to bring in new models or cut prices,” said James Hong, an analyst at Macquarie Securities Korea. While the carmaker recently launched the Infiniti QX80 sport utility vehicle and Nissan Kicks crossover, the two are lower-volume models and will do little to reduce the stockpile, he said.
Meanwhile, Nissan’s top-selling EV in the US — the Ariya SUV — isn’t eligible for the federal government’s purchase tax credit of up to $7,500 because it’s made in Japan. Nissan has gotten around this somewhat by taking advantage of credits available to leased vehicles. It’s offering leases for as low as $199 a month, making the Ariya one of the better EV bargains around.
Even so, data from car-shopping researcher Edmunds show Nissan still has among the highest levels of inventory in the country among major automakers.
Sure, Nissan says it’s going to launch seven new hybrids and EVs in the U.S. by 2028, but who knows what the automotive landscape will look like at that point. It’s anyone’s guess if folks will even wait that long for a Nissan EV or hybrid rather than just getting one of the other dozens of great cars already on the market.
Here’s more on Nissan’s financial situation, from Bloomberg:
The automaker’s operating profit plunged last quarter by an alarming 99%, leading management to lower their outlook for the year ending in March by 12% to ¥500 billion ($3.5 billion). The company also trimmed its full-year sales target to 3.65 million units.
Equity investors are clearly concerned — Nissan’s shares are down 27% this year — and credit analysts are starting to pen reports with alarming headlines. S&P Global $SPGI cut Nissan’s credit rating to junk in March of last year.
The automaker nevertheless plans to buy back ¥79.9 billion of its shares from Renault as part of an agreement to rebalance its alliance with the French carmaker.
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Aside from monthly sales reports, investors will get their next look at Nissan’s results in November, when the company is due to report its earnings for the quarter ending this month. If sales in the US and China don’t improve, those numbers are poised to disappoint.
Nissan is in a very worrying place right now, and it’s going to be very interesting to see how it gets itself out of this pickle. Hopefully, it’ll be able to float by on Rogue and Altima fleet sales until this new crop of EVs and hybrids can hit the market.
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