According to Reuters, Japanese automaker Nissan has significantly downgraded its full-year performance forecast as substantial discounts in the U.S. market nearly wiped out its profit for the second quarter (April to June).
Analysts had expected Nissan's second-quarter profit to exceed that of the same period last year, but the final result was only a fraction of the 164.4 billion yen average estimate from five analysts compiled by LSEG. Now, investors are worried about Nissan's prospects in the U.S., adding to the company's struggles as it tries to turn around its fortunes in another key market, China.
In the second quarter of this year, Nissan's operating profit totaled approximately 1 billion yen (about 6.5 million USD), compared to 128.6 billion yen in the same period last year, a year-on-year decrease of 99.2%. Operating revenue was 2.9984 trillion yen, compared to 2.9177 trillion yen in the same period last year, an increase of 80.7 billion yen. The operating profit margin was 0.0%, down 4.4 percentage points from last year. Net profit was 28.6 billion yen, a decrease of 76.9 billion yen year-on-year.
Nissan's global sales in the second quarter were flat year-on-year at 787,000 units, but profits were impacted by increased sales incentives and marketing expenses, especially in the U.S., to cope with fierce sales competition and optimize inventory.
From a market perspective, the U.S. and China were Nissan's two largest markets in the second quarter, and the only two markets with sales exceeding 100,000 units. In the fiscal year ending March this year, sales in these two markets accounted for half of Nissan's global sales, and 51% in the second quarter. Japan is Nissan's home market and its third-largest market by sales.
After experiencing the worst quarterly performance in over three years, Nissan downgraded its operating profit forecast for the current fiscal year (April 1, 2024, to March 31, 2025) by 16.7% to 500 billion yen. Due to lower-than-expected sales in the U.S. and China, the company also cut its full-year retail sales forecast by about 50,000 units to 3.65 million units, with production expected to be 3.45 million units. Net operating revenue forecast was raised by 400 billion yen to 14 trillion yen, while net profit forecast was cut by 80 billion yen to 300 billion yen.
Nissan CEO Makoto Uchida stated during the earnings release that the second quarter was very challenging for the company. However, he said Nissan would take clear measures to address the challenges and introduce new models to restore performance.
Uchida noted that Nissan is "optimizing inventory levels" in the U.S. and focusing on the quality of sales. The company plans to boost sales in the second half by launching new and updated models such as the Armada and Murano SUVs.
Following the latest earnings release, Nissan's stock price fell by about 11% at one point, closing down 7% at 485 yen, marking the biggest single-day decline since February this year. Nissan stated that the decline in its U.S. sales was due to aging models and increasing demand for hybrid vehicles. The challenges in the U.S. have exacerbated Nissan's difficulties, as it has been engaged in a price war with local automakers in China to regain market share.
Last month, Nissan announced it had suspended production at its plant in Changzhou, China, in a bid to optimize operations. This plant is the smallest but most advanced of the eight plants Nissan operates in China through its joint venture with local partner Dongfeng Motor.
