Nissan's turnaround depends on the quality of its sales and on the Alliance

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Nissan
Nissan surprised observers by announcing for the months of July to September losses much lower than those announced three months earlier on the one hand and those anticipated by analysts on the other hand. This "less worse" is first of all linked to the recovery of the American and Chinese markets so central to Nissan. It also bears the hallmark of the Nissan Next recovery plan which makes "sales quality" the key to a return to profitability. To make the reduction in design costs compatible with the necessary numerous new model launches, Nissan will have to make the synergies within the Alliance play more clearly and explicitly.
 
Although it was the subject of contrasting comments, the presentation of the results for quarter 2 of the current financial year for Nissan by its management team was rather reassuring and convincing.
 
Admittedly, compared to those that Toyota or Honda had had the opportunity to make a few days earlier, it was tempting to point out that, in China as in North America, Nissan is doing rather less well than the other two major Japanese manufacturers and is making losses where the latter are posting enviable profits.  
 
Nevertheless, if one compares quarter 2 to quarter 1, the improvement is very significant and seems to correspond at least as much to the effects of the recovery plan - called "Nissan Next" - in progress as to the market recovery observed almost everywhere in the world with the de-confinements.  
 
In terms of volumes, Nissan had sold only 643,000 vehicles in the first quarter of this fiscal year and between July and September passed the one million mark. This corresponds to sales growth of 64.1% which is slightly above that of the world market which, according to Nissan, would have been 62.8%.
 
However, this very slight improvement in market share does not seem to be to the detriment of the "quality" of sales. Indeed, it corresponds essentially to Nissan's outperformance in China and, to a lesser extent, in Europe. In the United States, where the market grew by 37%, Nissan is content with a 35% increase since, in line with Nissan Next's objectives, the company is not seeking to take advantage of the growth in fleet sales and is concentrating on the rest of the market: fleet sales have thus increased by 50% and Nissan's sales have fallen by 49% while non-fleet sales have increased by 31.7% and Nissan's by 34.7%.
 
We know the role that the dizzying drop in the economic performance of its North American activities had played in Nissan's descent into hell. It is conceivable that Nissan Next is first and foremost driven by the desire to reverse these trends and the presentation of the results heavily emphasises the successes underway in this field: Compared to the same indicators for the same quarter in 2019, the share of fleets in the sales mix fell by 20 points and this meant reducing sales to rental companies by 90%; dealer stocks fell by 38% (28 days); "incentives" per vehicle sold fell by 5% and net income increased by 3%; the average profitability of dealerships gained 2.2 points; the residual values of the Sentra and the new Rogue (X-Trail at home) performed better than those of competing models.
 
One might object that Nissan started from such a low base that it could only improve, but the fact remains that, even before having rejuvenated a range that everyone agrees to describe as ageing, Nissan - a little like Renault and by applying similar methods - managed to give itself back some "pricing power". The part of Nissan Next called "sales quality" stands out here as crucial and it seems that it is on this side that we must look to find the springs of the observed improvement.
 
In comparing the results of quarter 2 of 2019 - which were still positive by 30 billion yen - to those of 2020 - which are negative by 4.8 billion yen - the main causes of the fall are the drop in volumes and the deterioration of the mix which pulled profits down by 171.5 billion yen and the currency effects (- 14.5 billion yen).
This was offset by the improvement in "cost of sales" (+ 44.9 billion yen) and the work done on costs (monozukuri) which would have weighed 106.3 billion yen. On this side, when one looks at the details of the plan, the targeted optimisations certainly concern manufacturing or overheads, but they also concern R&D and design costs as well as marketing and sales.
 
This means that Nissan Next is, for the United States first of all but also for Europe, Japan and China, a commercial rationalisation plan which consists of cleaning up the catalogues by reducing the number of models and giving ourselves the means to no longer have to push metal to get back into profit.
In the plan presented in May, the managers thus announced that they planned to reduce production capacity and the number of models by 20%.
 
The closure of Barcelona embodied this strategy in Europe and the number of jobs lost associated with this plan is 14,000.
 
At the same time, Nissan has to renew its ranges and electrify them in its main markets, particularly in the United States and China. It is here that the Alliance must play its part and ensure that the numerous launches are carried out in compliance with the reduction of the targeted R&D and design costs. Apart from the Ariya, whose platform is shared with Renault and will therefore be co-financed by the French, the Kicks and Magnite models have been developed using the B0 platform or the CMF-A and already embody this strategy to some extent. The future Micra will be, it is announced, a very close "relative of the Clio 5" as the Kadjar is a close cousin of the Qashqai.
 
Thus, even if its leaders still say it too little, Nissan's recovery is going through the Alliance and tomorrow Renault will be able to find in its accounts a positive contribution from Nissan again. The end of the tunnel is looming.
 

The weekly column by Bernard Jullien is also on www.autoactu.com.

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