Nissan Company: Updated Jan. 20, 2024.

 

Nissan ups full-year profit outlook on weak yen, faces task in China

Article Source: https://mainichi.jp/english/articles/20231109/p2g/00m/0bu/068000c

Article:

TOKYO (Kyodo) -- Nissan Motor Co. on Thursday upgraded its earnings forecast for fiscal 2023, with net profit projected at 390 billion yen ($2.6 billion) citing brisk sales and a weak yen. But the Japanese automaker also said it faces the "immediate task" of improving its business in China.

The profit estimate for the year through next March represents a 75.8 percent rise from the previous year. It was revised from a projection in July of 340 billion yen.

The company forecasts operating profit and sales at 620 billion yen and a record-high 13 trillion yen, respectively, also upgraded from 550 billion yen and 12.6 trillion yen.

Ideas:

Regarding China, the South Korean company Hyundai is scaling back production in China due to increased competition from Chinse car makers. Hyundai used to have 5 plants in China and now they are down to two.

So Nissan might have some difficulties in the Chinese market with Chinese car markers improving.

Back in 2022, and before, Japanese carmakers were having supply chain challenges so maybe in 2023 the challenges have been reduced.

Also, if it was any problem related to company image, maybe they are passed the Ghosn situation from a few years a ago.

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With the weakening yen, it has now set the assumed exchange rate of the Japanese currency at 140 yen against the U.S. dollar and 153 yen versus the euro, revised from 132 yen and 139 yen, respectively. A weaker yen normally bloats Japanese exporters' overseas profits when repatriated.

For the first half ended in September, Nissan reported an over four-fold jump in net profit from a year earlier to 296.21 billion yen. Operating profit more than doubled to 336.74 billion yen on sales of 6.06 trillion yen, a record high and up 30.1 percent.

Ideas:
Nissan might be making significant profits due to the weak yen , but as far as domestic production goes, Nissan still has to deal with domestic supply chain challenges, if it imports any parts for it cars, it like all companies in Japan has to deal with increased energy and oil prices related to imports as the weak yen increases import prices.

The three major car companies in Japan, Toyota, Honda, and Nissan all seem to be well positioned in the global markets to increase in sales and profits.

The real challenge in 2024, is, if the Bank of Japan decides to increase its key rate, which could cause the weak yen to strengthen, which then Japanese exporters could have their profit reduced. 

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The yen's depreciation contributed to the rise of operating profit by 13.3 billion yen, it said.

Global unit sales increased 3.3 percent for the six months to 1.62 million cars, faring well in Japan, North America and Europe.

But Nissan struggled in China due to intensifying competition and a shift in the country to new energy vehicles such as electric vehicles and plug-in hybrids. In the world's largest auto market, it logged a 34.3 percent fall in unit sales.

Ideas:

Japan might not have a weak yen for much longer, or maybe it will, but Japanese exporters need to plan for when the yen is not so weak. 

But most likely, in recent reports, due to inflation in Japan, the Bank of Japan might not change its ultralow policy anytime soon, which will keep the Japanese yen weak, and help Japanese exporters.

Regarding China, four new Nissan models might help in the Chinese market, but maybe not, as Chinese car makers seem to be ahead in the EV markets, as again, Hyundai, which makes EV cars seems to giving up on the Chinese market, with closing 3 of its 5 plants in China.

It will be interesting to see what Toyota, Honda, and other car makers such BMW are doing in China with increased competition from the Chinese carmakers.

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To reverse the slump, Nissan said it plans to release four new models of new energy vehicles in China starting in the second half of 2024.

"By implementing our plans rapidly and reliably, we hope to improve our performance and put it back on track toward growth in the challenging Chinese market," Nissan President Makoto Uchida said at an online press conference.

The automaker maintained its full-year global sales target at 3.7 million units.

Ideas:

Again, four new models might help, but will it sway the average Chinse consumers to buy a brand that is not Chinese.

Some suggest, there are now not so good relations between China and Japan, and will it affect Chinse consumers from buying Japanese cars.

But, to be fair, Chinese tourists are still coming to Japan in large numbers despite some not so good relations between the two governments.

The same situation is happening in South Korea, with many South Korean products, which used to be popular in China, are losing significant market share, such as South Korean cars and South Korean cosmetic brands.

Have a nice day and be safe!