Nissan dealership profits tank amid U.S. sales struggles

In the first half of 2024, U.S. Nissan dealership profitability plunged to the lowest level in nearly 15 years as the Japanese brand hemorrhages market share.

About 38 percent of Nissan's 1,071 dealerships across the country are losing money, a retailer with knowledge of the matter told Automotive News.

"Dealers are struggling more than they have in a long time," said the person, echoing several others interviewed. "We need volume, and we need volume fast."

According to Nissan financial data obtained by Automotive News, the dealership network's return on sales — a key measure of profitability — slumped to 1 percent in the first half of the year, from 3.2 percent a year earlier.

The average net profit for a dealership in the first half cratered 70 percent to $262,582. The red ink has led to attrition, with Nissan losing eight franchised stores so far this year.

The pace and extent that store profitability has fallen is alarming, another dealer said. Five dealers interviewed for this story asked not to be identified for fear of retaliation.

"In many markets, Nissan dealers are, at best, selling half the volume that competing Honda, Toyota and Subaru and Hyundai stores are selling," the person said. "If you're not selling enough new cars, you're not generating enough trade-ins, which feed profit centers such as finance, service and parts."

Nissan's U.S. share of 5.8 percent in the first half was 1.9 percentage points less than the brand had five years ago, according to the Automotive News Research & Data Center.

Meanwhile, Hyundai's share climbed 1.2 percentage points to 5.1 percent, Toyota's share rose 0.9 percentage points to 12.9 percent and Honda's fell 0.4 percentage points to 7.9 percent.

Higher interest rates, rising floorplan expenses and lower per-vehicle margins are squeezing profitability.

Alan Haig, president of buy-sell firm Haig Partners, said average dealership profitability industrywide dropped about 30 percent in the first half of the year, with Nissan and Stellantis dealers taking the biggest hits.

"It's symptomatic of a mismatch between price and product," Haig said. "What drives the bottom line are good products priced at a desirable level."

Nissan spokesperson Kyle Bazemore said the brand is working on a "number of initiatives" to prioritize dealer profit opportunities, including boosting throughput.

"We are in this market side-by-side with our dealer network to win new business and increase the Nissan customer base," Bazemore said.

New products, including the redesigned Kicks, Armada and Murano, should lift brand awareness and traffic into stores.

But as hybrids have gained popularity, Nissan hasn't embraced the technology as quickly as its Japanese rivals.

Nissan Motor Co. is the only major automaker that doesn't offer a mild or plug-in hybrid vehicle in the U.S. In the next three years, Nissan will introduce its e-Power series hybrid system to the U.S. and will deliver a plug-in hybrid model based on the Mitsubishi Outlander PHEV's powertrain. The next-generation Nissan Rogue, expected in 2027, will have e-Power and PHEV variants.

But in the interim, Nissan's competitors are capitalizing on hybrid fever. Hybrid or plug-in hybrid models accounted for 29 percent of Toyota Motor's roughly 2.25 million U.S. sales last year, up from 24 percent the year before. And, hybrids accounted for about half of Honda Accord and CR-V sales in 2023.

"Hybrid is the new EV, and automakers positioned to take advantage of this shift are grabbing sales and market share, while those caught flat-footed are losing both," iSeeCars executive analyst Karl Brauer said.

Nissan told dealers in April that it expects revived product and marketing to propel the brand's U.S. sales more than 20 percent higher in fiscal 2024, which runs through March 2025. But it has been a rough start, with sales down 2.3 percent in the April-through-June quarter.

Nissan aims to end the fiscal year with retail market share of 6.2 percent, executives told dealers. The brand's total share was 5.4 percent in fiscal 2023, which ended March 31, according to the data center.

Retailers said the revenue and market share targets are aspirational.

"Nissan lacks a comprehensive incentive strategy to drive customer consideration and sales," one said.

Bazemore said Nissan is committed to driving higher consideration with "consistent, breakthrough marketing where the car is the star."

The renewed marketing effort moves away from Nissan's celebrity-driven advertising. New commercials will emphasize vehicle features and design as well as the dealership experience.

Dealers say Nissan's sales volume cannot sustain a retail network built for market share of 7 to 10 percent. Those interviewed said the brand should have up to 40 percent fewer dealerships.

"Nissan needs to look strategically at which markets are overdealered and start buying out underperformers," one retailer said.

According to the 2024 Automotive News Dealer Census, Nissan started the year with 1,079 U.S. franchises — more than Honda (1,070), Hyundai (841) and Kia (788).

Haig said trimming the network would "dramatically improve" profits for the remaining stores. It has been done by other automakers, such as General Motors and Ford Motor Co.

"But I don't see any evidence that Nissan is offering any kind of money to get the dealers to close," Haig said. "I don't think they have the money to do it."

Bazemore declined to comment on "hypothetical scenarios" involving Nissan's retail footprint.

Haig said he expects a shakeout in the Nissan dealer network to occur, with some larger, diversified retailers looking to offload a weaker franchise and focus their investments on stronger, more profitable brands. That would create opportunity for newer, less-capitalized dealers to buy those Nissan stores because they're affordable and have potential to improve financially in the years ahead.

"It's a win-win," Haig said. "Larger dealers shed money-losing stores, and smaller dealers have the opportunity to grow."