In a significant market downturn, Nissan Motor’s shares fell sharply by 12% on Friday, marking the company’s most substantial decline in over twenty years. This drop came on the heels of the automaker’s quarterly earnings missing expectations significantly and a reduction in its global car sales forecast, highlighting intense competition in China.
China’s burgeoning market for electric vehicles, led by local brands like BYD, has seen a shift in consumer preference towards affordable, tech-forward cars designed for the younger demographic. This shift has resulted in a notable market share decrease for international automakers, with Nissan feeling the most significant impact. The company, which considered China its largest market until 2022, has struggled to regain its footing following internal strife and the scandal involving former Chairman Carlos Ghosn.
Analysts point out that compared to its rivals, such as Toyota and Honda, Nissan is particularly vulnerable in China due to weaker brand equity and value. “Nissan is the most vulnerable,” said James Hong, head of mobility research at Macquarie. “They feel the most pressure with Chinese makers becoming increasingly aggressive for market share.”
Nissan’s market value saw a reduction of $1.8 billion after the 11.6% stock price decline. The automaker reported a third-quarter operating profit of 141.6 billion yen ($948 million), falling short of analyst expectations by a fifth, and adjusted its global vehicle sales outlook downward by 150,000 cars to 3.55 million. Stephen Ma, Nissan’s Chief Financial Officer, attributed the revised sales forecast to the company’s performance in China, where sales dropped by a quarter over nine months leading to December 31, and to competitive pressures in other major markets, including the United States.
The competitive landscape in China has forced foreign automakers to reduce prices, exacerbating the impact of declining sales. Nissan reported an 8% decrease in net revenue per vehicle in China, raising concerns over potential “zero-margin business” scenarios. Analysts suggest that recovery in the Chinese market might take years and would require automakers to develop models tailored to local preferences, notably in technology features such as automated parking and voice recognition.
Nissan has announced plans to start exporting cars from China to other markets from 2025, targeting annual volumes between 100,000 and 200,000 vehicles. This move, along with efforts to optimize manufacturing capacity in China, reflects a broader strategy among Japanese automakers to adapt to the shifting market dynamics. Despite the challenges, Nissan aims to remain a significant player in China, focusing on regions with slower electrification rates to boost sales, as evidenced by a nearly 20% increase in sales in the last quarter of the previous year.
