Nissan's U.S. Shocker Should Speed Push Into China

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(Bloomberg) -- Nissan Motor Co.’s jaw-dropping plunge in U.S. car sales shouldn’t be a surprise. The Japanese automaker had it coming all along.

Led by industry rainmaker Carlos Ghosn, Nissan’s deliveries in North America declined 28 percent in April. And it wasn’t just one particular make. Sales of almost every model of car and truck slipped, including the high-end Infiniti brand.

Japan’s carmakers, especially Nissan, have been aggressive in grabbing market share in the U.S.

At one point, the big three, including Honda Motor Co. and Toyota Motor Corp., commanded a stronger position than Detroit’s mighty trio of General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV.

But Nissan’s ascent has largely been on the back of heavy buyer incentives, plus its sales quality has been deteriorating. In the nine months to December, U.S. sales incentives accounted for 90 percent of all marketing costs. A hard fall was inevitable.

Nissan’s disastrous April raises questions whether the firm is orchestrating a deliberate pull back in one of the world’s biggest car markets. Ghosn has spoken of the increased value that comes from selling into emerging markets, and shifting away from developed countries that, like the U.S., have peaked.

The company has been struggling to manage inventories, and business was shaky before last month. Other one-time factors were also present: April had two fewer sales days than a year ago, plus there have been a rash of management changes.

A targeted shift away from the U.S. makes sense.

There’s growing uncertainty around trade policy,  and any form of import tariffs risks a hit to Nissan’s local operations.

Autos also account for almost 80 percent of Japan’s trade surplus with the U.S., likely a point of contention in bilateral talks.

And while there was some good news in April’s numbers – sales of Nissan’s all-electric LEAF model increased 10 percent – prospects for green cars are dimming in America.

If anything, Nissan looks more ready to sink its teeth into China, the world’s biggest auto market. The Renault-Nissan-Mitsubishi alliance last month struck an agreement with Didi Chuxing to explore fleet sales, auto leasing and car sharing.

Management has also predicted double-digit growth in China at a time vehicle sales are slowing. The country’s ambitious green-car policy also plays into Nissan’s forte – battery technology.

Nissan’s pivot toward China at a time U.S. sales are cratering looks like the right turn. Investors should hope it can stay the course.

©2018 Bloomberg L.P.

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