QUOTE AND NEWS
Automotive World  11 hrs ago  Comment 
Nissan today announced a new marketing platform that addresses the obstacles and challenges of everyday driving, and showcases the advanced technology capabilities of Nissan’s 2016 vehicle lineup that allow drivers to “Take On” whatever...
The Economic Times  Jun 7  Comment 
With India expected to become the world's third-largest car market by 2020, Nissan hopes Datsun's Redi-Go will help arrest falling sales and boost its market share.
Clusterstock  Jun 7  Comment 
TOKYO (Reuters) - A Japanese women has filed a negligence suit against Takata Corp and Nissan Motor Co after she sustained injuries when a passenger-side air bag made by Takata exploded in her Nissan vehicle last year, NHK national television...
Automotive World  Jun 7  Comment 
Nissan has announced the kick-off of Fast-E, a European Union (EU) backed project designed to improve electric vehicle (EV) infrastructure. Nissan has co-financed this project with the EU and eight other companies, with a total investment of...
Automotive World  Jun 7  Comment 
Nissan today responded to a final report by the Korean Ministry of Environment (MOE) that the Nissan Qashqai sold in Korea was found to be arbitrarily setting its engine system to illegally control gas emissions. “Nissan Korea’s priorities...
Automotive World  Jun 6  Comment 
The Renault Trucks OptiTrack range is being extended. This traction system, which features hydraulic motors in the front wheels, gives the vehicle temporary extra pulling power. Available on the Renault Trucks C, it can now equip 8×4 and 8×2*6...
The Hindu Business Line  Jun 5  Comment 
Global NCAP will test the Kwid again, says company’s chief executive
Forbes  Jun 5  Comment 
The specter of a late 2017 release of the Tesla Model 3 is already having a profound effect on sales of the world's most popular electric car, the Nissan Leaf. At least that's what electrek and others are suggesting.
The Hindu Business Line  Jun 2  Comment 
Motorsports version of Nissan's track-ready sports car gets more stylish and more focused
The Economist  Jun 2  Comment 
CONSIDERING the help provided to big foreign manufacturers in Morocco over the past few years, it would have taken a serious effort by them to fail. Renault, a French carmaker, for example, is thriving: of 2.8m cars it made globally last year, one...




 
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

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki