Nissan wants to cut North America's capacity by 20%
According to foreign media reports, Nissan is preparing to cut its output in North America by 20% to cope with the company's car market in the United States, and Nissan's first decline in the US auto market in 8 years in 2017. Nissan's production plan is expected to end before this autumn, when the redesigned Altima will be released.
Nissan's two assembly plants in the United States and three assembly plants in Mexico have begun to cut production capacity. Foreign media pointed out that Nissan will not lay off workers and the production line will not stop completely. Workers can rest for two days or more days a week. By the summer, Nissan's output in these areas will drop by 10% to 20%. Parts suppliers have received notice of reduction in production, which may temporarily affect their income. Most of the passenger cars that Nissan invested in the US market are produced in five factories in the United States and Mexico, some imported from Japan and elsewhere. The company also assembled the Infiniti luxury car in Mexico through a joint venture with Daimler.
In the last fiscal year of March 31st, Nissan accounted for 28% of its global sales in the US market, and Nissan sold 5 million 770 thousand vehicles in the first fiscal year. In the current fiscal year, the expected production cut will reduce Nissan's sales in the US market by 3% to 1 million 550 thousand vehicles.
Since the global financial crisis in 2008, market demand has steadily recovered. Nissan focused on building market share in the US market. The company's strategy includes providing large and low profit sales to car rental companies and generous sales subsidies. The subsidy cost before Nissan has obviously reached at least $4000 per vehicle, which is higher than the industry average of US $3600.
The company's sales and discounts revitalize the short-term turnover, but in the long run, it will affect brand value and pressure on business. Starting from the current fiscal year, Nissan will reduce its sales scale and incentive measures from a scale based strategy to a profit focused strategy.
Altima and Rogue are Nissan's best selling models in the United States. Nissan ranks sixth in the US auto market, behind GM and Japanese counterparts TOYOTA and Honda.
In Nissan Renault MITSUBISHI alliance, each company has more or less delineated its own market area. French car manufacturer Renault is strong in Europe and South America, while MITSUBISHI in Japan is booming in Southeast Asia. But its performance in the US market is sluggish, and Nissan plays a leading role in the US market in the alliance. Therefore, the sales performance of the US market will affect the international strategy of the alliance.
According to data provided by Fourin, a Japanese market intelligence company, global car sales increased by 2.7% to 96 million 220 thousand last year. As the world's largest auto market, sales in the Chinese market increased by 3% to 28 million 870 thousand vehicles. However, sales in the world's second largest market dropped by 1.8% to 17 million 550 thousand. Since the financial crisis, the demand for the US market has been increasing, but it is clear that the peak of its market demand stays in 2016, and the future growth prospects are slim.
As the Trump administration renegotiated the North American free trade agreement with Mexico and Canada, the US market faced more uncertainty. A 25% tariff on imported vehicles in the name of national security has surfaced, which may raise the price of American vehicles.
In addition to Nissan, other competitors in the US are also adjusting their production structure. Ford announced plans to phase out traditional cars and turn to trucks and Mustang sports cars; Honda is also cutting the accord's output.