Nissan trims 6% of U.S. Q1 output to offset high inventory, parts shortage

Nissan Motor Co. is taking the shears to production as new vehicles idle on dealer lots and parts shortages hamstring the supply of the brand's top seller.

In a planning document sent to suppliers this month and obtained by Automotive News, Nissan said it will cut 6 percent of U.S. output in the first quarter, or about 10,200 vehicles. The manufacturer cut an additional 1,178 vehicles in December.

According to Cox Automotive, Nissan's days' supply, which includes vehicles en route to dealers, hovered at 106 days at the end of last year — 50 percent higher than the national average of 70 days. Nissan had the highest inventory of any full-line brand at the end of December.

The compact Rogue crossover makes up more than half the planned output reduction in the first quarter. Nissan said lower output of the brand's bestseller is partially because of parts shortages affecting certain trims.

Nissan will also snip supply of the Pathfinder crossover and Frontier pickup in the January-to-March period.

The Japanese automaker intends to lower its longer-term U.S. production forecast. The automaker projects fiscal 2024 U.S. factory output will drop 1.7 percent from the current fiscal year, which ends March 31.

Nissan spokesperson Brian Brockman said the company adjusts production "when necessary to maintain healthy inventory levels while meeting demand in the market."

But Nissan dealers said cutting production does not solve their profitability problem. Nissan told dealers that nearly a third of the U.S. retail network operated in the red late last year.

"We need a plan that increases sales volume," Nissan National Dealer Advisory Board Chairman Tyler Slade said. "We need to sell more cars, not less."

Rogue is one of just two models that Nissan plans to build fewer of in fiscal 2024. According to Nissan's forecast, U.S.-made Rogue output will drop 8.5 percent compared with fiscal 2023.

The Rogue accounts for a third of U.S. sales. Nissan sold 271,458 Rogue crossovers in the U.S. last year, a 46 percent increase over 2022.

Nissan dialed up Rogue manufacturing last year. AutoForecast Solutions estimated that production rose 40 percent from 2022.

The increased supply, rising interest rates and stiffening competition manifested itself on Nissan dealership lots. According to Edmunds, the average time it took to move Rogue inventory more than doubled to 55 days in 2023 from the previous year. The compact crossover segment had a 33-day average turn last year.

AutoForecast Vice President Sam Fiorani said Nissan "significantly overshot" its production forecast and is making up for it at the end of fiscal 2023.

"Intense competition and demand for lower-priced models are shifting the production mix industrywide," Fiorani said.

Judy Wheeler, Nissan Division's U.S. sales boss, hinted at the production cuts earlier in the month. Customer demand shifted last year as interest rates climbed, Wheeler told Automotive News Jan. 4.

"At the beginning of the year, the interest rates weren't as high; customers were looking for vehicles [with] more equipment," Wheeler said.

But as interest rates and monthly car payments rose, customers steered toward more affordable, less complex vehicles.

"Because of that, we probably got too high on [supply of] some vehicle lines," Wheeler said. Dealers "will see day supply fall here shortly."

Nissan's Q1 production cuts occur in the first two months, with 13,441 fewer vehicles being built in January and February than previously forecasted. But in March, Nissan will crank out an additional 3,243 vehicles, the planning document noted.

The supply reduction isn't sitting well with some Nissan retailers.

"We do have a high days' supply, but we don't have an inventory problem," said a dealer who asked not to be identified. "We have a sales problem and we have a throughput problem."

Slade said the Nissan retail network is built to be a nearly 10 percent market share brand. But Nissan's U.S. market share slid to 5.3 percent last year from 7.8 percent in 2018, according to Automotive News Research & Data Center.

Lifting volumes will require a greater focus on affordability as rising interest rates and inflation squeeze the mainstream brand's price-conscious buyers.

Retailers say Nissan must turn on the demand spigot with more marketing and incentive support on vehicles.

"Nissan is a Main Street USA brand with paycheck-to-paycheck buyers," said Slade, operating partner at Tim Dahle Nissan Southtowne in suburban Salt Lake City. "We can help move the excess production with extremely low-interest [financing] that customers need now."