Nissan Motor has announced plans to cut 9,000 jobs and reduce its global production capacity by 20%, alongside a major revision of its annual profit forecast. This comes as Japan’s third-largest car manufacturer faces economic challenges in its key markets, particularly China and the United States.

The automaker has now lowered its annual operating profit projection by a significant 70%, bringing it down to 150 billion yen (£975 million). This follows a prior adjustment earlier in the year when Nissan reduced its profit outlook by 17%. The most recent results reveal that operating profits for the July to September quarter fell drastically by 85%, reaching just 32.9 billion yen. This figure is considerably below analysts' predictions of 66.8 billion yen.

A Strategy to Streamline and Strengthen Nissan’s Business

In response to these financial pressures, Nissan's CEO, Makoto Uchida, announced a series of restructuring measures aimed at making the company leaner and more resilient in the face of global economic changes. “Nissan will restructure its business to become leaner and more resilient, while also reorganising management to respond quickly and flexibly to changes in the business environment,” Uchida explained. He added that the job cuts and production adjustments do not signify a shrinking of the company but rather a strategic move towards long-term stability.

Declining Sales in China and the US

Nissan’s global sales have seen a decline of 3.8% in the first half of this financial year, with the company selling 1.59 million vehicles. A major factor in this decline is a 14.3% drop in sales in China, a market where Nissan has been striving to regain traction amidst fierce competition from local brands, especially in the growing electric vehicle sector. In the United States, sales fell by nearly 3% to around 449,000 vehicles, reflecting Nissan's struggle in two markets that collectively account for almost half of its global sales by volume.

CEO Uchida highlighted that several of Nissan’s core models in the US failed to meet sales expectations. He also acknowledged that Nissan had underestimated the rising demand for hybrid and plug-in hybrid vehicles, leaving it without the necessary line-up to effectively compete in this area.

Challenges in the Global Car Market

Nissan’s situation is part of a wider trend among foreign car manufacturers who are struggling to gain ground in China’s increasingly competitive automotive market. Chinese brands, particularly in the booming electric vehicle segment, have managed to quickly adapt to consumer demands, challenging international carmakers like Nissan to keep up. Honda, Japan's second-largest carmaker, reported a surprising 15% drop in second-quarter operating profit, also largely due to dwindling sales in China. The news has affected Honda’s shares, which fell by 5% after the announcement, underscoring the pressure facing Japanese carmakers in China.

Despite these hurdles, Nissan’s stock performed relatively well, closing up 2.2% ahead of the profit announcement, while Japan’s broader market index saw a modest decline of 0.25%.

Nissan’s Path Forward

As Nissan navigates these challenges, the company is focused on refining its business operations to remain competitive in a rapidly evolving market. Nissan’s restructuring plan will involve making its management more responsive to shifts in consumer demand and accelerating its push towards hybrid and electric models. By reducing global production and optimising its workforce, Nissan aims to better position itself for future success, especially in light of the mounting demand for eco-friendly vehicles.

The automaker’s commitment to sustainability and innovation will play a crucial role as it adapts to these shifting market dynamics. Nissan’s strategic adjustments reflect a larger industry trend towards sustainability, with many automakers intensifying their focus on electric and hybrid vehicles to meet both consumer expectations and regulatory demands.

In conclusion, while Nissan faces significant challenges in China and the US, its restructuring efforts aim to streamline its operations and strengthen its position in a competitive global market. The company’s renewed focus on flexible management, leaner production, and a growing range of eco-friendly vehicles may help Nissan weather the current storm and emerge stronger for the future.

Source: (Investing.com, Reuters)