CEO Makoto Uchida says Nissan U.S. incentive spending nearly erases quarterly profit

TOKYO – Nissan has a Rogue problem in the U.S. that is torpedoing global profits.

A lackluster launch of the updated crossover, Nissan’s top-selling nameplate, forced the embattled Japanese automaker to hoist incentives on mounting inventories of the outgoing model.

The result was soaring expenses that nearly erased parent company operating income.

In announcing the dramatic profit plunge in Nissan’s fiscal first quarter, CEO Makoto Uchida blamed the downturn on U.S. operations and cut the company’s full-year financial outlook.

“We were unable to boost volume as expected,” Uchida said at the company’s July 25 earnings announcement. “This has been a very challenging quarter for Nissan.”

Nissan’s operating profit collapsed 99 percent to ¥995 million ($6.4 million) in the three months ended June 30. Net income tumbled 73 percent to $183 million.

Worldwide sales essentially flatlined at 787,000 vehicles in the April-June quarter.

Nissan’s North American volume declined 1.7 percent to 323,000 vehicles, on a 3.1 percent slide in U.S. sales to 237,000.

Sales slid because of problems in model changeovers for the Rogue and Sentra small car as well as because of Nissan’s aging product portfolio and its lack of hybrids.

“The results for the first quarter were due to the impact of the U.S. operations,” Uchida said. “We knew that optimization of inventories in the U.S. would pressure our profit.”

To limit the decline and bolster demand, Nissan booked overall selling expenses and pricing adjustments of around $498.5 million, taking a huge bite out of operating income.

Nissan cleared stocks of the 2023 Rogue as the company rolled out the freshened 2024 model of the popular nameplate. The model changeover, Uchida said, was further undermined by a sudden softening of overall U.S. market demand that required more spiffs.

Nissan’s spending over the quarter came mostly in consumer loan assistance, instead of cash on the hood, to buoy resale values, Uchida said.

“The most important factor here is U.S. inventories,” he said.

Nissan’s global inventory, including dealer and company stocks, has swelled since March 2022, when it stood at 250,000 vehicles.

By the latest quarter, it had ballooned to 640,000 vehicles.

Nissan plans to reel in inventories to manageable levels over the July-September quarter, partly by adjusting production, Uchida said. Upcoming updates of higher-margin, upmarket nameplates, including the Murano crossover and Armada SUV, will help sell vehicles, he said.

Nissan thinks it can bring down U.S. inventories 20 percent by the October-December quarter.

In other regions, Nissan’s sales rose 7.6 percent to 79,000 in Europe in the quarter ended June 30.

China, a recent sore spot for Nissan, saw a stabilization from last year’s sales slide, contributing a 3.3 percent volume increase to 167,000 vehicles. Japan sales declined 8 percent to 98,000.

Looking ahead to the full fiscal year ending March 31, 2025, Nissan expects operating profit to decline from last year. It had originally forecast a modest increase.

“Given the challenges of the first quarter, we are revising our guidance for the full year,” Uchida said, calling the new targets “achievable” if the company’s stabilization plan works.

Operating profit is now pegged to fall 12 percent to $3.2 billion.

But the outlook is premised on a favorable exchange rate of ¥155 to the U.S. dollar. Nissan’s previous forecast was based on a more conservative rate. The ultra-weak Japanese currency has fallen to its lowest levels against the dollar since 1990.

But over the last month, the yen has started to strengthen to more historical levels. As Nissan announced its targets, the yen gained again against the dollar, advancing to ¥152.

If the yen continues to appreciate, it could exacerbate the challenge of achieving Uchida’s goal.

Nissan also cut its sales outlook for the current fiscal year.

It now expects global retail deliveries of 3.65 million vehicles. That would mean a 6 percent increase over the previous fiscal year. But it is down from the 3.7 million initially outlined.

North American sales are seen increasing 12 percent to 1.41 million vehicles, while Europe advances 6.5 percent to 385,000. But China is forecast to decline 3 percent to 770,000.