Nissan OK with rising fleet sales

NEW YORK -- Nissan's presence in the U.S. daily rental fleet business is rising, and Nissan North America Chairman Jose Munoz says that's a good thing.

"It's part of the business," Munoz told Automotive News during a wide-ranging discussion at last week's New York auto show. "The dollars we get are relevant, so we're going to continue to be there, even if other companies don't want to."

Munoz made the defiant declaration partly in response to criticism from competitors about Nissan North America's overall market share growth. Detractors have commented -- usually in hushed tones -- that Nissan's climb to a 10 percent U.S. market share has relied on increased sales to rental fleets rather than organic demand from retail customers.

Munoz's message?

Yes, of course it includes fleet sales, he says. And no, there's nothing wrong with that.

"I guarantee you that every fleet sale we do in the United States is a profitable sale," he said, or the company wouldn't do it. "In many regions of the world, the best corporations are also the best in fleet. The important thing is do responsible fleet," he said.

Automakers face a difficult task in calibrating their fleet strategy. Heavy sales to daily rental agencies boost volumes up front, but the effects tend to surface a few years later in the form of bloated used-car inventories that can depress resale values and transaction prices. That dynamic has kept Honda largely out of the rental business and led industry watchers to be wary of fleet-driven sales gains.

At the same time, rental lots provide a more amenable market for cars as the retail market leans heavily toward trucks. And brands that consider themselves challengers have much to gain by exposing new customers to their vehicles. 

Nissan, for its part, has worked hard over the past two years to raise customer-facing transaction prices and doesn't want higher numbers of fleet cars to erode that progress. 

Munoz said carefully managing product mix in fleets is the key to simultaneously lifting transaction values and taking advantage of fleet sales. "It's not either-or," he said. "It's both."

Munoz's U.S. organization delivered a 10.3 percent U.S. market share for the first three months of 2017, a notch better than the March 31, 2017, goal of 10 percent set in motion six years ago by Nissan Motor Co.'s then-CEO Carlos Ghosn. At the time, Nissan and Infiniti combined for a market share of 6.8 percent in the U.S.

Nissan tries to keep its fleet business in the range of 15 to 20 percent of its total U.S. sales. That translates to about 20,000 to 25,000 fleet deliveries a month, based on current volumes.

Last year, Nissan sold 262,851 vehicles to the rental market, an increase of 37 percent from 191,373 in 2015, according to data obtained from Bobit Business Media, publisher of the trade magazine Automotive Fleet. Nissan is the No. 4 supplier of rental market vehicles in the U.S., behind Fiat Chrysler Automobiles, General Motors and Ford Motor Co.

As GM slashed its rental sales by about 73,700 vehicles last year, Nissan's rental volume increased by 71,478, the largest increase in rental volume by any automaker in 2016, according to the Bobit data. That occurred in a year when Nissan's total U.S. sales increased by 79,505, or 5.4 percent, to 1,564,423 vehicles.

But fleet volumes are not static, and not even entirely predictable, Munoz pointed out. Fleet customers, such as the large daily-rental companies, negotiate orders for thousands of vehicles at a time. And those contracts specify trim packages and model years -- which means that a big order could be delayed by a few months, causing periodic spikes in volume.

Munoz also notes that the fleet business is competitive and says that some of his competitors have been unsuccessful at capturing the business.

Munoz says Nissan is not trying to outsell anybody in fleet, but he wants to increase activity where it's profitable, particularly in corporate fleet sales. Those are dealer sales of multiple vehicles to companies with specific model needs -- for example, a fleet of small cars to a national pharmaceutical company.

"It all depends on your strategy on how you go to market and what features you use," Munoz said. "Some fleet sales might not be as profitable, but they are still good. They allow customers who don't know your brand to drive your car and see what you're doing."

Nissan is coincidentally trying to step up its involvement in commercial-vehicle fleet sales with vans and pickups through a portion of its retailers, though those vehicles still represent a small fraction of the total activity.

"It takes investment to have the capacity to be in this business," he added. "Others may decide not to invest and to sell only retail. We're committed to this market and we see potential."