QUOTE AND NEWS
Automotive World  Jul 8  Comment 
Completely redesigned for the 2013 model year, Pathfinder takes another significant leap forward for 2017. The new Pathfinder offers more adventure capability, more power and towing capability, a freshened exterior look and enhanced safety and...
Automotive World  Jul 7  Comment 
Auto industry studies estimate that by 2020, 80 percent of all new vehicles will be equipped with telematics systems. The new 2017 Nissan Pathfinder gets a jump on the future with a range of enhanced “family adventure-ready” connectivity and...
The Economic Times  Jul 7  Comment 
Globally, Renault said its total sales in the first half of 2016 stood at 15,67,720 units as against 13,82,122 units in the corresponding period last year, up 13.4 per cent.
Automotive World  Jul 7  Comment 
Groupe Renault today announced record sales for the first half of 2016. In H1 2016, in a global automotive market up 2.5%, Groupe Renault’s registrations grew strongly by 13.4% to 1.57 million vehicles. Market share was up 0.3 points at 3.5%....
Automotive World  Jul 7  Comment 
Car manufacturer Nissan has agreed a three year partnership to sponsor Sky Sports’ FA Premier League (FAPL) coverage, starting with its biggest ever season from 13 August. As part of the agreement Nissan will become the exclusive weekend sponsor...
Automotive World  Jul 7  Comment 
Nissan has become the first automotive brand in Europe to sell a vehicle exclusively through the use of social networking site Twitter. From first contact with the client to the final decision to purchase – just six days later – all...
Automotive World  Jul 6  Comment 
The Nissan Qashqai Black Edition sets a new standard for sophisticated design in the crossover segment, with a range of styling enhancements to elevate it further into the premium sector. Based on the flagship Tekna trim level, a number of...
Automotive World  Jul 6  Comment 
Renault UK car sales were up 21.0 per cent during the first six months of 2016 to 44,570 vehicles – considerably outpacing the car market growth of 3.2 per cent, according to the official figures released today from the Society of Motor...
TechCrunch  Jul 5  Comment 
 To say that Nissan is watching Tesla’s every move would be an understatement. The Japanese automaker started this month with a splash, announcing it is expanding its No Charge to Charge promotion to include 11 new markets, such as Las Vegas,...
Automotive World  Jul 5  Comment 
The new Clio R.S. 200 EDC, Clio R.S. Trophy and Clio GT-Line incorporate the advances offered by the new Clio and further enhance that package by drawing on Renault Sport’s wealth of knowledge and expertise. ”The new Clio R.S. offers the full...




 
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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