Nissan Motor experienced its most significant stock decline in over twenty years, plunging by 12 percent on Friday, following disappointing quarterly earnings and reduced car sales estimates, primarily attributed to intense competition in the Chinese auto market. This information is sourced from a Reuters report.
The rise of domestic Chinese brands like BYD, offering affordable electric vehicles tailored to local preferences, has heightened competition, resulting in a substantial loss of market share for foreign automakers such as Nissan.
According to Reuters, James Hong, head of mobility research at Macquarie, underscored Nissan’s susceptibility in China compared to its Japanese counterparts, Toyota and Honda. “Compared to rivals Toyota Motor and Honda Motor, Nissan is the ‘most vulnerable’ in China,” he stated.
Nissan’s recent 11.6 percent stock decline translated into a $1.8 billion market value loss, indicating investor apprehensions regarding the company’s performance and future prospects.
The automaker reported a third-quarter operating profit significantly below analyst projections and revised its global vehicle sales forecast downward, citing challenges in China and other key markets like the United States.
Stephen Ma, Nissan’s Chief Financial Officer, attributed the sales forecast revision to the company’s Chinese performance, where sales dropped by a quarter in the nine months leading up to December 31. Ma also acknowledged heightened competition in other critical markets, including the United States, prompting Nissan to adjust its strategies and incentives to bolster competitiveness.
In the fiercely competitive landscape of China’s auto market, Nissan confronts the possibility of a “zero-margin business,” where sales may barely break even due to necessary price reductions amidst intense competition.
Analysts caution that Japanese automakers must tailor their product offerings to local preferences to facilitate a recovery in China, a process that could span several years.
To address the evolving preferences of Chinese consumers, particularly younger demographics, Japanese automakers may need to prioritize incorporating advanced technological features such as driving assistance systems and automated parking.
Nissan has outlined plans to utilize excess capacity in its Chinese plants to produce models catering to both local and export markets, with aspirations to commence exports from China to overseas markets by 2025.
Highlighting the company’s efforts to regain traction in China, particularly in regions where electrification adoption is slower, Nissan’s CFO Stephen Ma emphasized their commitment to this endeavor.
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