Nissan is facing one of its toughest financial challenges in recent history.
Late last week, the Japanese automaker reported dismal global sales figures, raising concerns that it may fall short of its fiscal year profit forecast, which the company already lowered back in July due to poor sales. Operating profit plunged by 99% last quarter, and sales dropped 5.5% in August, marking the company’s fifth consecutive month of decline, according to Bloomberg News.
The picture became even more grim on Tuesday after Nissan announced its third-quarter U.S. sales, down 2.2% year over year. With major markets like the U.S. and China performing poorly, Nissan’s future looks precarious. The question on everyone’s mind is whether they can turn things around.
A losing battle in China
One of Nissan’s biggest hurdles lies in its two largest markets: the United States and China. Together, these regions account for nearly half of the automaker’s global sales volume, and both are underperforming in different ways.
In China, Nissan’s sales slumped 24% in August. This decline was partly expected, as the company had already begun closing a plant and cutting production capacity after years of weak performance. Local competitors like BYD have taken the lead in the electric vehicle (EV) race, offering models loaded with the high-tech features Chinese consumers demand. Nissan, meanwhile, has struggled to keep up.
The Nissan Motor Co. headquarters in Yokohama, Japan, on Friday, May 31, 2024. Nissan is planning an autonomous vehicle ride-share service for Japan in three years to address a dearth of taxi drivers amid the nation’s graying population. Photographer: Akio Kon/Bloomberg via Getty Images
Behind the curb in the United States
The situation in the U.S. is different but equally challenging. While Chinese vehicles aren’t a significant factor due to tariffs, Nissan still needs to capitalize on the growing demand for hybrids as quickly as competitors like Hyundai and Kia. Nissan doesn’t offer hybrid models in a market where gas-electric vehicles are increasingly popular.
Many of Nissan’s models are dated, some haven’t seen an update in nearly 5 years. While Nissan has recently introduced a new Kicks and Armada, the rest of their lineup shows its age. At the same time, competition from the likes of Ford, Chevy, Honda, Hyundai, and KIA have all recently introduced freshly updated vehicles at similar price points.
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In August, U.S. sales slipped by 0.1% — a far more modest retraction than the one the company saw in China, but a point of concern nonetheless as the first monthly decline since April. That’s concerning, especially as other automakers are seeing steady growth in the EV and hybrid segments.
While Nissan saw a 2.2% decline in third-quarter U.S. sales. Hyundai reported a 5% increase in U.S. sales in that same time. Hyundai attributes the success to strong hybrid sales, which saw a 36% year-over-year jump in September.
Dealer struggles and excess inventory
Nissan’s difficulties are hitting its dealerships hard. U.S. dealers have seen their profits fall by a staggering 70% over the past year. Despite increased spending on advertising and incentives, many Nissan dealers are struggling to move 2023 models off their lots.
James Hong, an analyst at Macquarie Securities Korea, told Bloomberg that he believes Nissan will need to either introduce new models or slash prices to clear its inventory. However, the recent launches of the Infiniti QX80 SUV and Nissan Kicks crossover won’t be enough. These lower-volume models will do little to address the stockpile of unsold cars.
Meanwhile, the company’s top-selling electric vehicle, the Ariya, is not eligible for the $7,500 federal tax credit in the U.S. because it’s manufactured in Japan. While Nissan has found some success with low-cost lease deals, the Ariya remains a tough sell in a market flooded with EV options.
A grim financial picture
The financial outlook for Nissan is troubling. The automaker’s operating profit for the last quarter plummeted by 99%, leading to a trimming of its full-year outlook. Nissan now expects to bring in ¥500 billion ($3.5 billion) by the end of the fiscal year, a 12% reduction from previous estimates. The company also slashed its full-year sales target to 3.65 million units.
The Nissan Motor Co. headquarters in Yokohama, Japan, on Friday, May 31, 2024. Nissan is planning an autonomous vehicle ride-share service for Japan in three years to address a dearth of taxi drivers amid the nation’s graying population. Photographer: Akio Kon/Bloomberg via Getty Images
These numbers haven’t inspired confidence in investors. Nissan’s stock has dropped 27% this year. With more bad news potentially on the horizon, Nissan’s upcoming quarterly earnings report in November will be closely watched. If sales in the U.S. and China don’t improve, Nissan could be in for another rough quarter.
A path to recovery?
Despite the grim outlook, Nissan has a plan to revive its fortunes. The automaker has pledged to launch seven new hybrid and electric models in the U.S. by 2028, a move that could help it compete in a rapidly changing market. But is this enough to turn things around?
One of Nissan’s biggest challenges will be convincing consumers to wait for its new lineup of hybrids and EVs, rather than opting for the many alternatives already available. Companies like Toyota and Ford are pushing forward with innovative hybrid models, while Tesla and Rivian continue to dominate the EV market. With such stiff competition, Nissan’s timeline for releasing new models may be too little, too late.
What’s next for Nissan?
Nissan’s future is uncertain, but the company isn’t out of options. To avoid falling off the financial cliff, Nissan will need to aggressively push its new hybrid and electric models, streamline its production capacity, and continue offering attractive incentives to move current inventory. It will also need to win back consumer trust by offering vehicles that are competitive in both price, technology and style.
The road ahead won’t be easy, but Nissan’s survival may depend on its ability to make quick, decisive moves in an industry that’s changing faster than ever. The next few quarters will be crucial. Investors, dealers, and consumers alike will be watching closely to see if Nissan can turn things around before it’s too late.
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