Nissan slashes sales target as China auto downturn looms

A Nissan dealership in Shanghai, China. Sources say Nissan will not release major new models in China, the world's biggest car market, through 2020. Nissan chief executive Hiroto Saikawa is reportedly prioritising profitability over sales volume, unl
A Nissan dealership in Shanghai, China. Sources say Nissan will not release major new models in China, the world's biggest car market, through 2020. Nissan chief executive Hiroto Saikawa is reportedly prioritising profitability over sales volume, unlike his predecessor Carlos Ghosn.PHOTO: BLOOMBERG

It says venture with Dongfeng Motor will sell 200,000 fewer units than expected

BEIJING • Nissan Motor is cutting a future target for China car sales by about 8 per cent amid signs the world's biggest car market is beginning an extended downturn, sources said.

Nissan and Wuhan-based Dongfeng Motor now forecast that their joint venture will sell 2.39 million vehicles in 2022, the end of the current mid-term plan - a reduction of more than 200,000 units from the previous target.

The revision is being discussed as Nissan chief executive Hiroto Saikawa embarks on a programme to put profitability before growth in sales volume, the sources said. That includes possibly taking a break from introducing brand-new models in China.

"You need to invest to survive," said Guotai Junan Securities analyst Toliver Ma, who is based in Hong Kong. "All players, big or small, will need a plan for their electric vehicles, especially to compete in China."

Mr Nicholas Maxfield, a spokesman for Yokohama-based Nissan, said yesterday that the company has not announced any changes to its China business plan.

The Nissan-Dongfeng venture said it will review the mid-term targets and may adjust them based on market conditions. Dongfeng shares fell 1.2 per cent in Hong Kong on Wednesday, while Tokyo exchanges were closed yesterday for a holiday.

Nissan's strategy in China, a longstanding priority and point of pride under Carlos Ghosn, is the latest shake-up since the former chairman's arrest on Nov 19 last year, after which Mr Saikawa took over.

Ghosn is charged with falsifying financial information and breach of trust. He has denied the charges and will go on trial after being freed on bail earlier this month.

Under Ghosn, Nissan pledged to invest US$9 billion (S$12 billion) in China over five years and introduce 20 electric vehicle (EV) models by 2022. It intended to boost annual deliveries by one million units, compared with last year's total sales of 1.56 million vehicles, including imports.

A source said Mr Saikawa's mandate to Nissan executives is not to focus on sales volume as Ghosn did, but to boost profit.

No major new Nissan models are planned for the China market through 2020. Its luxury Infiniti brand will not launch any new vehicles through 2021.

Given current conditions, this is probably the right approach, said Ms Janet Lewis, an analyst at Macquarie Capital Securities (Japan). "The move by Saikawa to improve the profitability of sales, even if it means a lower market share, is correct," she said.

Nissan does not comment on its product plans, Mr Maxfield said.

At risk is Nissan's standing as the biggest Japanese carmaker in China and the third biggest among foreign companies there, trailing only Volkswagen and General Motors.

China is the world's biggest market for EVs, with consumers there buying one of every two sold globally. Every manufacturer there must meet strict output targets for Neighbourhood EVs or buy credits from competitors as the government moves to phase out gas guzzlers.

Nissan's Leaf is the best-selling EV ever, according to data compiled by BloombergNEF, and has spawned a wave of competing models from traditional automakers as well as start-ups like Tesla and NIO.

Another cause for concern: China's annual car sales declined last year for the first time since the early 1990s, and ongoing trade tensions with the United States threaten to dampen demand even further. Cutting costs in such an environment may deliver short-term profit gains but hurt Nissan's chances to compete down the road.

"Fresh new models are what will keep traffic coming to the showroom,'' said Mr Bill Russo, chief executive of Shanghai-based consultancy Automobility. "It's especially true in hyper-competitive markets like China."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 22, 2019, with the headline 'Nissan slashes sales target as China auto downturn looms'. Print Edition | Subscribe