Nissan's U.S. dealers face an existential crisis as they enter the new decade.
A dated product line, coupled with years of heavy discounting and residual value-hurting fleet sales, have left Nissan's retailers with trickling customer traffic and bloody balance sheets.
About 40 percent of U.S. dealers are losing money, or merely breaking even, Nissan National Dealer Advisory Board Chairman Scott Smith, 55, told Automotive News.
"We've told Nissan that this is a falling knife," said Smith, president of Smith Automotive Group in Atlanta.
The Nissan division's U.S. sales fell 8.7 percent to 1.22 million vehicles last year, in an overall market estimated to be down just 1.2 percent.
If Nissan doesn't throw resources at the problem, sales will drop further, Smith warned.
"You'll have more of your dealer body relying on just used cars and not engaging in programs," he said.
Nissan management has received the message. Last year, the automaker shifted strategy — pivoting from fleet sales and discounting to shore up brand value and margins.
Meanwhile, a major product reboot planned over the next 18 months is expected to reinvigorate customer interest in the brand and help lift transaction prices.
Scott spoke with Staff Reporter Urvaksh Karkaria about the headwinds and opportunities facing Nissan dealers in the year ahead. Here are edited excerpts.
Q: What are the major issues facing Nissan in 2020?
A: Return on sales, return on sales and return on sales! Our profit is dead last in the industry; we are the lowest OEM in that regard. It isn't one thing that led to that, it's a whole list of things Nissan needs to address.
We don't have a strong-enough brand and we have a product portfolio that's 15 to 18 months behind everyone else. Our competition's already beaten us to the market. When you are doing business with a stale product, no matter how good the engineering is, the brand value doesn't transfer to the consumer.
Half the dealer body is disproportionately selling used cars to survive because the brand isn't driving customers to the showrooms. We are not converting as many customers from our website, because the value of the brand isn't there. The competition — Hyundai, Kia, Toyota, Honda — are pulling ahead of us because they are bringing newer product to the market and have better targeted advertising.
Nissan reportedly is ramping up sales and warranty audits of its dealers. No other OEM does this so extensively. If there's genuine fraud happening at a dealership, we expect Nissan to conduct audits. But these audits are a cash grab. There's plenty of Nissan dealers in the country that have capital requirements right now with the level of business that we are doing. This is the wrong time to be doing this. It sours the relationship between dealer and brand.