QUOTE AND NEWS
MarketWatch  Jul 2  Comment 
Japanese stocks rallied in early Thursday trading, as a fall in the yen and a rise for U.S. shares helped ease jitters about Greece and lift the Nikkei Average 1.2% and the Topix by 1.1%. The moves extended the previous day's 0.5% advance on the...
newratings.com  Jul 1  Comment 
YOKOHAMA (dpa-AFX) - Nissan Group (NSANF.PK, NSANY.PK) reported that total U.S. sales for the month of June 2015 rose 13.3 percent to 124,228 units, from 109,643 last year. Total car sales for the month increased 3.3% to 71,557 units, while total...
Automotive World  Jul 1  Comment 
Renault has been in racing since what Michael Van Der Sande, the company’s Senior Vice President of Marketing, describes as “the very beginning,” and it is something “enshrined in the brand’s DNA" The post Interview: Michael Van Der...
Automotive World  Jul 1  Comment 
On June 28, Carlos Ghosn, Chairman and CEO of Groupe Renault, and Jérôme Stoll, Chief Performance Officer and Executive Vice President, Sales & Marketing, hosted the 2015 Renault EV Awards in London to honour the Renault brand’s 20 leading...
guardian.co.uk  Jul 1  Comment 
Electric car sales have fallen far short of predictions, but the global push to cut carbon emissions and improved techology could see them poised to hit the mainstream, says Renault-Nissan’s head, Carlos Ghosn Carlos Ghosn, the fast-talking...
Automotive World  Jul 1  Comment 
Toyota Motor Corporation, Nissan Motor Co., Ltd., and Honda Motor Co., Ltd. have agreed on key details regarding a new joint support project for the development of hydrogen station infrastructure in Japan. In addition to partially covering the...
Automotive World  Jun 30  Comment 
Renault’s commitment on sustainable transport for all dates back more than twenty years. In 2007, Renault was the first carmaker to launch a label —eco²— that would provide customers with at-a-glance identification of the vehicles with...
The Times of India  Jun 29  Comment 
Japanese auto major Nissan will recall around 12,000 units of various models, including mid-sized sedan Sunny and small car Micra, manufactured between June 2013 and March 2015 in India as part of its global campaign to rectify engine switch and...
Automotive World  Jun 29  Comment 
Latin NCAP has said Renault broke its promise to fit life-saving occupant airbags as standard The post Latin NCAP clamps down, stripping Renault of three-star safety rating appeared first on Automotive World.
Automotive World  Jun 29  Comment 
Nissan Motor Co., Ltd. today announced its production, sales and export figures for May 2015. 1. Production Nissan’s global production in May increased 1.9% year-on-year to 434,332 units. Production in Japan increased 8.0% year-on-year to 66,978...




 
TOP CONTRIBUTORS

Japanese automaker Nissan is one of the most profitable automakers in the world. A strategic alliance with French automaker Renault has proven to benefit the company.

The company is trying to further increase profitability and has set its sights on gaining market share against industry leaders like Toyota and the floundering US Big Three: (General Motors, Ford and DaimlerChrysler). In order to do this, Nissan has established a plan to develop efficient, alternative-energy and hybrid powered vehicles in order to compete with alternative-energy auto leaders Toyota and Honda for the increasingly important alternative and renewable energy auto market. Despite being a latecomer to the field, Nissan has monetary incentives on its side: the current industry-wide system of federal tax credits given for the sale of hybrid vehicles will cease to apply to Honda and Toyota cars after these companies sell a certain (and rapidly approaching) preset number of hybrid cars.

Nissan's challenges will be many, including rising prices for steel and aluminum and fluctuations in exchange rates. Rising steel and aluminum prices drive up production costs and drag down profits. As a Japanese company, when the Japanese yen appreciates to the US dollar, sales in the US become less valuable to Nissan and it loses profits. Also, an appreciated yen makes Nissans more expensive for American consumers and drives down demand.

Business Overview

Nissan sells cars under two brands:

  • The Nissan line is aimed at middle-class Americans and includes popular sedans such as the higher-end Altima and Maxima, and the lower-end Sentra. Nissan's line also includes trucks, sports cars and SUVs.
  • The Infiniti brand is Nissan's luxury line aimed at higher-income consumers who want high-performance automobiles that come with the best possible features and styling. Like all luxury cars, Infiniti generates higher profits per car than the Nissan brand. However, sales of Infiniti branded cars account for only a small fraction of Nissan's total global sales.

Nissan and Renault

In 1999 Nissan was in a dire situation--steamrollered by the competition, the business was losing billions of dollars. In order to effect a turnaround, Nissan established a formal alliance with the leading French automaker Renault (about 15% of Renault is actually owned by the French government). In the 1999 deal, Renault received a 40% stake in Nissan, and Nissan received 15% of Renault's stock. In the short term, the founding of the alliance provided financial capital to revitalize Nissan and innovative ideas from new management. Today, the two companies continue to work together on research and development, purchasing agreements, manufacturing, and logistics and distribution. In fact, Nissan and Renault even share a CEO in Carlos Ghosn.

Trends and Forces

Rising Incentives Industry-Wide Could Infringe on Profits

A current trend in the auto industry involves the use of incentives (special financing deals, reduced prices, factory rebates, etc.) in order to encourage consumers to purchase new automobiles by lowering the cost of a vehicle. As domestic automakers GM, Ford and DaimlerChrysler continue to struggle in the auto market, they have been turning to heavy incentive use in order to generate sales. The average incentive on an automobile from a domestic automaker (i.e., one of the Big Three) is approximately $3,358. Meanwhile, Asian automakers have been saving profit by limiting incentives on their vehicles (the average incentive on an Asian companies automobile is $1,478). The average incentive on a Nissan automobile is $2,211, a figure lower than the Big Three's, keeping Nissan's profit margin relatively healthy; however, Honda and Toyota offer even lower incentives yet still manage to sell more autos than Nissan.

Growing Demand for Alternative-Energy Autos

Despite the global energy crisis and the increasing research in renewable energy for automobiles, Nissan has yet to release an alternative-energy powered vehicle, such as a hybrid vehicle like the Toyota Prius or Honda's hybrid Civic. This has hurt Nissan: hybrids have become increasingly popular as rising oil prices have led consumers to seek more efficient vehicles. In order to capitalize on the growing market for hybrid and alternative-energy vehicles and catch up with alternative-energy auto leaders Toyota and Honda, Nissan recently announced the Nissan Green Program 2010. The Nissan Green Program 2010 is Nissan's medium-term plan towards making its cars more eco-friendly. The Green Program included plans for:

  • Reducing CO2 emissions in all vehicles and manufacturing plants
  • Eco-friendly diesel engines by 2008 in Europe and 2011 in Japan, China and North America
  • Bio-ethanol-capable vehicles within the next three years
  • Electric vehicles to be launched in the Japanese market around 2010
  • A hybrid automobile for launch in North American and Japan around 2011
  • Fuel cell vehicles for North America and Japan sometime after 2010

Exchange Rates Can Help and Hurt Profits

As a Japanese automaker that relies upon sales across the globe, particularly in the US, Nissan is greatly affected by changes in exchange rates. Fluctuations in the yen/dollar exchange rate significantly affect Nissan's profits. Also, in the long run, fluctuations in exchange rates can affect consumer demand as well--appreciating and depreciating currencies may change the relative prices of autos. For example, when the yen appreciates relative to the US dollar, auto sales in the US decrease in worth for Nissan, while concurrently Japanese cars become more expensive for US consumers, lowering demand for Nissans.

Competition

Despite being one of the world's smaller automakers in terms of sales, Nissan is one of the most profitable major automakers, trailing only Toyota and Honda in operating margin. Also, Nissan hopes to boost overall profitability by revitalizing its Infiniti brand line of luxury cars, which are estimated to have a profit margin twice as high as Nissan's middle-market cars.

In the luxury car market, NSANY competes with Toyota's Lexus, Honda's Acura, Ford's Jaguar, Lincoln, Land Rover and Lincoln brands, GM's Buick, Saab and Cadillac and DaimlerChrysler's Mercedes-Benz line. Nissan's competitors are in similar situations with their respective luxury lines, as none of these companies' luxury lines account for much more than 10% of revenue. However, since the profit margins are so much higher in the luxury brands, growing sales of luxury lines is important to all of the automakers, and competition amongst these brands is intense.

Nissan is in the process of growing in size to match up with Toyota and the Big Three. Nissan hopes to utilize its advantage in profitability over the Big Three to take over more market share in the auto industry as the ailing giants struggle under the financial burden of expensive health benefits and pension plans. After overtaking the Big Three, Nissan will have to compete with the top two Japanese automakers, Toyota and Honda as those companies are likely to continue to grow as they ride the success and growing popularity of their hybrids. Once Nissan has matured to a size comparable to Toyota, it will be able to focus on the future of automobiles in its alternative-energy and hybrid research and development and begin competing head-to-head with Toyota and Honda.

References

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