Nissan Faces Challenges Amidst Strategic Shifts in Q1 2024

In its first-quarter fiscal 2024 earnings call, Nissan Motor Co., Ltd. navigated a challenging landscape, marked by slower sales and increased operational pressures. Despite a slight rise in global retail sales and net revenue, the company faced notable headwinds, particularly in the U.S. and Japanese markets. There was a glimmer of good news regarding electrification, however.

Financial overview and market performance

Nissan's net revenue for Q1 2024 stood at approximately ¥3 trillion, a modest increase from the previous year. However, the company's profit margins were adversely affected by several factors. Operating profit was reported at ¥1 billion, while net income reached ¥28.6 billion. The automotive business, despite a slight revenue increase to ¥2.68 trillion, recorded an operating loss of ¥74 billion, with auto free cash flow dipping into negative territory at ¥302.8 billion.

Stephen Ma, Chief Financial Officer, highlighted the company's financial struggle: “Our profit was adversely affected by several negative factors, which will be explained in later slides. We are announcing the results against challenging conditions and weaker performance in the first quarter.”

NISSAN MOTOR CO.

Nissan's global retail sales were relatively stable at 787,000 units. However, the company's production fell by 7.5% to 784,000 units. Sales in China showed a slight increase of 3.3%, while Europe saw a 7.6% rise. Conversely, Japan and North America experienced declines of 8% and 1.7%, respectively. Ma noted, “In Japan, overall retail sales decreased by 8%... Models such as Serena e-POWER, Aura, and DAYZ have shown a positive trend in sales.”

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Regional performance and strategic adjustments

In North America, Nissan's retail sales dropped by 1.7%, with a more significant 3.1% decrease in the U.S. This decline was partly due to the delayed transition to the 2024 model year for Rogue and Sentra. Ma explained, “The decline in U.S. sales was primarily influenced by the impacts of delayed model year changeover for Rogue and Sentra... We aim for a 20% normalization of our inventory during the next few months.”

In Europe, Nissan outperformed the market, with retail sales rising to 79,000 units. The company’s electrification mix now stands at 49%, driven by strong demand for e-POWER variants. “Ariya is well received by our customers and continues to win awards, the latest being named Best Car for Long Distance by Auto Trader,” Ma highlighted.

NISSAN MOTOR CO.

China remains a critical yet challenging market for Nissan. Despite intensified competition from domestic brands, the company’s brands performed relatively well, with Sylphy maintaining its top position in the ICE Passenger Vehicle segment. CEO Makoto Uchida remarked, “The total industry volume share of International passenger vehicle brands decreased by 15% year-over-year. By contrast, the Nissan brands performed well among International brands, declining only 2.3%.”

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Outlook and strategic initiatives

Looking ahead, Nissan has revised its full-year guidance in response to the Q1 performance. The company now expects unit sales to decrease slightly to 3.65 million units, with production volumes forecasted at 3.45 million units. Uchida noted, “Given the challenges seen in the first quarter, we are revising our guidance for the full year... Revenues are expected to rise to ¥14 trillion, with operating profit revised to ¥500 billion for the full year.”

Uchida emphasized the importance of new model introductions in the second half of the year to boost sales and stabilize profitability: “We are introducing the Armada, Murano, INFINITI QX80 in the United States, and expect good demand for the Note, Sakura, Serena, and DAYZ in Japan.”

Strategic focus on electrification

Nissan's commitment to electrification remains central to its long-term strategy. While specific new initiatives were not detailed during the call, the company underscored its dedication to expanding its electrified vehicle lineup and advancing related technologies. The focus on electrification is evident in several areas:

As Nissan navigates these turbulent times, the company remains committed to its strategic objectives, aiming for a recovery through innovation and market adaptation.