How did Nissan reach this critical juncture? Where should it go from here?

Produced by | New Product Strategy Finance | Authored by Wu Wenwu

Nissan, amid its current crisis, is hanging by a thread. How did it arrive at this point? And where should it head from here?

01 Nissan's Crisis Deepens

Amid the surging sales of new energy vehicles in China, the decline in sales of joint venture automakers is no longer news. However, Nissan has recently been plagued by a flurry of negative headlines.

New Product Strategy Finance observed that on October 10, the topic "Nissan Responds to Bankruptcy Rumors" once again topped the Baidu Hot Search financial chart, sparking widespread market attention and heated discussions.

Recently, according to numerous domestic and international media reports, due to limited cash reserves, Nissan is actively seeking new investors; otherwise, it faces bankruptcy within 12 to 14 months. News of Nissan's impending bankruptcy spread rapidly.

Nissan has long been in a financial crisis, and the situation continues to deteriorate. According to Nissan's financial report, the net loss for the second quarter of fiscal year 2024 amounted to 9.34 billion yen.

In response to media reports about its impending bankruptcy, Nissan stated that as of the end of September this year, the company had a net cash position of 1.36 trillion yen and was taking urgent measures to accelerate business transformation and turn around its performance.

Some institutions estimate that Nissan is expected to sell 3.5 million vehicles in fiscal year 2026, ensuring profitability and cash sustainability.

In accelerating the restructuring of its business structure, Nissan has initiated a series of cost-cutting measures.

For example, Nissan plans to reduce fixed costs by approximately 300 billion yen. To achieve this, Nissan will cut global production capacity by 20% and lay off 9,000 employees worldwide, along with restructuring its management team.

Nissan's operating crisis has long been evident in its financial data. From April 2020 to March 2021, the company incurred an operating loss of 150.7 billion yen. Although it achieved profitability in the three fiscal years from April 2021 to March 2023, this fiscal year "may see a deficit of several hundred billion yen".

Nissan's performance further deteriorated in 2024. According to the company's financial report, Nissan's net revenue for the first half of fiscal year 2024 (April to September) declined by 1.3% year-on-year to 5.9842 trillion yen (approximately RMB 290 billion), with operating profit down 90.2% to 32.9 billion yen and net profit at 19.2 billion yen, a year-on-year decrease of 93.5%. During the same period, global new vehicle sales declined by 1.6% year-on-year to 1.596 million units.

Notably, one significant reason for Nissan's losses is its poor performance in overseas markets. For instance, in the North American market, sales of its electric vehicles have been declining.

To revive its performance, Nissan has increasingly relied on sales incentives in the U.S. market to maintain sales, leading to increased costs and decreased profit margins. Its North American operations incurred an operating loss from April to September this year.

Nissan is facing increasingly challenging times globally!

02 The Road to Crisis

Nissan's journey in the Chinese market has been one of rapid growth, peaking, and then a swift decline.

Nissan was one of the earlier Japanese automakers to enter the Chinese market. In November 1973, the first Nissan Cedric sedan arrived in China. It wasn't until 1985 that Nissan established an office in Beijing.

In 1993, Zhengzhou Nissan, Nissan's first joint venture for complete vehicles in China, was established, followed by the establishment of Dongfeng Nissan, a joint venture between Nissan and Dongfeng Motor in 2003.

Nissan benefited from the golden age of China's joint venture automobile development. During its peak period, Nissan sold over 1.5 million vehicles in the Chinese market in 2018 and 2019, enjoying immense popularity in those years.

However, since 2019, Nissan's sales in the Chinese market have been declining year by year. By 2023, sales in China had plummeted to 798,300 units, a year-on-year decrease of 24.05%.

According to Nissan's data, in November, Nissan China (including passenger vehicles and light commercial vehicles) sold 63,545 units (including Infiniti imported cars), down 15.1% year-on-year. From January to November this year, Nissan China sold a total of 621,713 units, down 10.53% year-on-year.

In the current Chinese automotive market, Nissan is facing the most difficult times among the three major Japanese automakers.

In June this year, Nissan announced the closure of its passenger vehicle plant in Changzhou, Jiangsu, a joint venture with Dongfeng Motor. With an annual production capacity of about 130,000 units, the plant had been in operation for less than four years, surprising the market.

Why is Nissan losing ground in the Chinese market? In the view of New Product Strategy Finance, besides the continuous decline in sales, which is a key reason, there are more underlying factors.

Whether in the Chinese or global market, Nissan's model renewal speed lags far behind its peers, not only European and American automakers but also competitors like Toyota and Honda.

The slow model renewal makes it difficult to attract consumers. For example, Nissan's SUV model Qashqai has been slow to update, with minor facelifts and simple changes to the front design.

Regrettably, Nissan missed the opportunity to capitalize on the development of new energy vehicles in China. While Nissan's electrification efforts started early, with its star electric vehicle model Leaf selling well in the international market, it was never introduced to the Chinese market.

In recent years, as China's automotive market has entered the era of new energy vehicles, local new-energy automakers have emerged, and traditional automakers have also shifted to electrification. Nissan has been slow in this transition, lagging far behind German automaker Volkswagen.

Even when Nissan accelerated its electrification efforts in the Chinese market, its new electric SUV model Ariya was initially priced high, and its overall product appeal failed to attract Chinese new energy vehicle consumers, especially young consumers.

Furthermore, Nissan's luxury automobile brand Infiniti, which the company had high hopes for, further hindered Nissan's progress. Initially, Infiniti gained market share as an imported luxury car, enjoying a brief period of glory. Later, it was locally produced, but its brand influence was not as strong as that of Lexus. Nowadays, Infiniti has little presence in the domestic luxury fuel vehicle market and is outsold by Lexus in the North American market.

The continuous decline in Nissan's sales in the Chinese market is a microcosm of the diminishing halo effect of traditional joint venture automobile brands. Chinese local automobile brands have risen, especially in the field of new energy vehicles, leaving Nissan with limited options.

As the second-largest market for Nissan globally, poor performance in the Chinese market has only exacerbated the company's difficulties.

03 Nissan's Path Forward

Currently, Nissan is in a financial crisis, scrambling to save itself and seeking investors, but options are limited.

In the view of New Product Strategy Finance, based on current domestic and foreign media reports, it can be boldly predicted that Nissan has only three options.

The first option is to find a long-term, stable shareholder.

Nissan's alliance partner and collaborator Renault is selling its shares in the former, and Nissan needs to find a buyer for these shares.

According to foreign media reports, two informed sources stated that Nissan is looking for a long-term, stable shareholder, such as a bank or insurance group, to replace part of Renault's equity.

If a financial institution takes over part of Nissan's shares, it can provide funds without affecting Nissan's daily management and operations, which is likely the most desirable solution for Nissan.

Foreign media reports suggest that the troubled Nissan has attracted investment interest from Singapore-based Efimo Capital Management and Hong Kong-based Oasis Management, making it crucial to find major investors.

Whether Nissan can obtain investment from financial institutions depends on its asset value and future market expectations.

The second option is to collaborate, ally with, or deeply integrate with Japanese automotive brands.

Currently, Nissan is finalizing cooperation terms for new electric vehicles with its long-time rival Honda, but Renault hopes that Honda will accept part of its stake in Nissan.

Interestingly, since Nissan and Honda announced their collaboration in August this year, both have downplayed the possibility of capital cooperation. Some market observers believe that Honda acquiring shares is a last resort.

If Honda does acquire part of Nissan's shares in the future, the two companies can not only collaborate on electric vehicle models but also share many resources, significantly improving resource utilization and achieving a win-win situation.

The third option is that if Nissan cannot find new shareholders or investors, it may face bankruptcy reorganization.

If Nissan fails to find new shareholders or investors and sales continue to decline without new cash flow, its financial and operational difficulties will further intensify until cash flow dries up and operations become impossible. At that time, it is expected that the Japanese government will also intervene.

Some market observers believe that if Honda acquires Nissan in the future, there is still hope for creating a second Toyota. However, such a viewpoint holds little significance.

Nissan still has a long way to go to resolve its crisis, but time is of the essence. Especially in the Chinese market, where traditional joint venture automakers are rapidly losing their charm and local new energy automakers are rising strongly, Nissan needs to humble itself and comprehensively implement a local new energy strategy in the Chinese market. Perhaps there is still some hope for the future.

It is expected that by fiscal year 2026, Nissan will launch eight new energy vehicles in the Chinese market, including five under the Nissan brand. The first mass-produced model of Nissan N7 was unveiled at the Guangzhou Auto Show in November this year, but its appeal remains to be seen.

Overall, the market doesn't leave much time for Nissan.