Nissan has had a very good last few years in North America. The company’s growth plan has been an undeniable success, with sales figures growing at a strong clip. Between 2010 and 2017m, in fact, the automaker’s sales nearly doubled to attain 1.6 million units annually. Its market share, meanwhile, has been knocking at the door of the 10% club, a highly respectable place, to be sure. That sales-volume success has come at a price, however, and Nissan may now be balking at paying that price.
A central part of its strategy in recent years has been to prioritize volume instead of profitability. In concrete terms, this has meant that a good portion of its vehicles has been sold for use in fleets. This applies notably to the Maxima, for example. And when vehicle stocks started to accumulate, the company offered attractive incentives to consumers.
Of course, both of these are actually very efficient methods for eating into the parent company’s profit margins.
This is viable as a strategy during periods of strong growth, and it explains why Nissan took this route in trying to develop the North American market in recent years. Today, the region is the Japanese company’s second-biggest worldwide market, behind only China.
But reality came calling, in the form of a 6.5% decline in U.S. sales in 2018 to date. The company has had to take a second look at its strategy.
It has concluded from that look that a slowdown of production at its two American and three Mexican assembly plants isin order. For the moment, no layoffs are planned and no assembly lines will come to a halt. The keyword for the company is slowdown, and it could result in a 20% reduction in the rate of production of vehicles.
Nissan has not confirmed the move, which was reported today by Japanese daily The Nikkei. However, American Nissan dealers present at a meeting in April heard directly from the head of American sales, Dan Mohnke, that the company planned to apply some braking power to production, starting April 1, in order to reduce inventory
Just weeks ago, Nissan itself did announce that it was revising its North American strategy and that it would focus more on profitability than on sales-volume growth.
During the last fiscal year, Nissan’s profits in North American fell by 31%.
This context certainly helps explain the company’s latest move.
In terms of production, the slowdown may be temporary, as the upcoming new Altima promises to hit the ground running and keep assembly plants humming.