Daniel Leussink
TOKYO (Reuters) - Nissan's new CEO Ivan Espinosa faces a daunting task of turning the struggling Japanese automaker, but there is no guarantee it can reverse top-notch sales, even if he tends to cut costs.
Nissan will be unable to stand onshore sales due to a lack of new models, new tariffs in the largest market, and fierce competition from local and Chinese competitors, and the company's sales have fallen by 42% since its 2017 business year.
Espinosa announced its layoffs Tuesday and closed seven factories, marking a 3% decline in sales for the current fiscal year as performance in its major markets continues to be under pressure.
It expects sales in China to plummet 18%, while sales in North America and Japan will remain almost flat.
"They don't have a mixed lineup. Their BEV is not particularly successful," said Julie Boote, an analyst at research firm Pelham Smithers Associates.
“They will have to start new model releases, but that takes time and there is no guarantee that they will be more successful than before.”
Espinosa has pledged to significantly reduce vehicle development time and to place its strategic focus in the most important U.S. markets, spanning crossovers and sporty cars.
"We know that a sustainable recovery cannot rely solely on cost reduction. It also has to be supported by strong products," he said.
As part of the strategy, Nissan will work with partner Mitsubishi Motors to develop the plug-in hybrid Rogue SUV (its best-selling U.S. vehicle) Rogue SUV this fiscal year.
Another hybrid for the vehicle will be launched in the next fiscal year and will be equipped with Nissan's electronically driven hybrid technology.
Bott said she doesn't believe the success of the strategy, warning that the plug-in hybrid doesn't produce the same level of demand as the pure hybrid model.
"They will need to introduce attractive products to achieve this," said Masahiro Akita, senior analyst at Bernstein, referring to expanding growth in its highest production lines.
Tariff and margin challenges
New U.S. tariffs on imported cars and auto parts complicate Nissan's plans to drop its sales to just 3% to 3.25 million vehicles in the current business year and need to reverse margin shrinkage.
Tariffs not only mean that prices may have to be raised in the United States, but also increase the cost of input to its manufacturing plants.
In the last business year, sales in the U.S. were about 938,000 cars, but the revenue was largely powered by lower-priced vehicles such as Sentra imported from Mexico.
Operating margins in the Nissan region fell by 0.5% during the operating year, even though more cars were sold there, it ended at 4.6% in the last period.
The company's imports from Mexico and Japan have less than 45% of total U.S. sales, and he expects U.S. President Donald Trump's tariffs could lose 400 billion yen ($3.1 billion) in the current operating year.
Profits are under pressure as Nissan's incentives reduce inventory of aging vehicle lineups.
At the same time, it faces competition not only from agile Chinese electric car manufacturers such as BYD, but also from domestic competitors, analysts said.
For example, its smaller rival Suzuki surpassed Nissan in the first three months of 2025, which certainly could replace it as Japan's third-largest automaker this year, which is Toyota and Honda this year.
Get smaller
Nissan, reflecting its worst fate, is the worst performing stock among major Japanese automakers, down 29% so far this year and 5.5% in the wider market.
Among the 18 analysts covering automakers, there are no buy or strong buying advice about Nissan shares, with half of them suggesting to sell or sell. Three months ago, there was a purchase suggestion.
Espinosa took over Nissan's helm last month with his predecessor, Makoto Uchida, after a failed conversation with larger rival Honda, which would create the world's fourth largest automaker.
Analysts say that Nissan's many mistakes are paying for years under former chairman Carlos Ghosn, where it takes too much value for sales and uses a lot of discounts to make the car stand out.
This has ruined its brand and has allowed the company to be updated now.
Boote fears that if Trump's tariffs on cars and auto parts remain the same for years, Nissan may not be able to hold on.
"The question is: Do they have time to turn the business around while having to deal with higher input costs?" she said.
($1 = 145.8800 yen)
(Reported by Daniel Leussink; Edited by Miyoung Kim and Sonali Paul)