Nissan Motor witnessed its sharpest stock decline in over two decades, plummeting by 12 per cent on Friday, following disappointing quarterly earnings and slashed car sales estimates, primarily attributed to fierce competition in the Chinese auto market.
This is based on a Reuters report.
The emergence of homegrown Chinese brands like BYD, offering affordable electric vehicles tailored to local preferences, has intensified competition, leading to a significant erosion of market share for foreign automakers like Nissan.
Reuters cited James Hong, the head of mobility research at Macquarie, who emphasised Nissan’s vulnerability in China compared to its Japanese counterparts, Toyota and Honda.
“Compared to rivals Toyota Motor and Honda Motor, Nissan is the ‘most vulnerable’ in China,” he said.
Nissan’s recent 11.6 per cent stock decline resulted in a $1.8 billion loss in market value, reflecting investor concerns over the company’s performance and outlook.
The automaker reported a third-quarter operating profit significantly below analyst expectations and revised its global vehicle sales forecast downwards, citing challenges in China and other key markets such as the United States.
Stephen Ma, Nissan’s Chief Financial Officer, attributed the downward revision in sales forecasts to the company’s performance in China, where sales plummeted by a quarter in the nine months leading to December 31.
Ma also acknowledged intensified competition in other crucial markets, including the United States, prompting Nissan to recalibrate its strategies and incentives to enhance competitiveness.
Amidst the cut-throat competition in China’s auto market, Nissan faces the spectre of a “zero-margin business,” wherein sales may barely break even due to price cuts necessitated by fierce competition.
Analysts warn that Japanese automakers must align their product offerings with local preferences to stage a recovery in China, a process that could span several years.
To address the shifting preferences of Chinese consumers, particularly younger buyers, Japanese automakers may need to focus on incorporating advanced technology features such as driving assist systems and automated parking.
Nissan has expressed intentions to leverage excess capacity in its Chinese plants to manufacture models catering to both local and export markets, with plans to commence exports from China to overseas markets by 2025.
Nissan’s CFO Stephen Ma highlighted the company’s efforts to regain traction in China, particularly in regions where electrification is progressing at a slower pace.
(With inputs from Reuters)