Japan’s Nissan Motor slashed its annual outlook on Thursday after deep discounting in the United States almost completely wiped out the automaker’s first-quarter profit, confounding analysts’ expectations and sending Nissan stock plunging 7%.
Investors are now concerned about Nissan’s prospects in the United States, adding to the challenges the automaker faces in another critical market, China. Operating profit for April-June totaled 995 million yen ($6.5 million), a significant drop from 128.6 billion yen in the same period a year earlier. This result was a fraction of the 164.4 billion yen average estimated by five analysts compiled by LSEG.
“The first quarter was a very tough one for Nissan,” Chief Executive Makoto Uchida stated during an earnings briefing. “However, we’ll recover our performance by taking clear measures to address the challenges and launching new models.”
Nissan plans to optimize inventory buildup in the U.S. and will focus on the quality of sales. The automaker aims to boost sales by introducing new and refreshed models, such as the Armada and Murano SUVs, in the second half of the financial year.
After enduring its worst quarterly performance in over three years, Nissan cut its operating profit forecast for the financial year by 17% to 500 billion yen. Additionally, the automaker reduced its retail sales forecast by approximately 50,000 vehicles to 3.65 million vehicles, citing weaker-than-expected sales in both the U.S. and China.
The U.S. and China are Nissan’s two largest markets, accounting for half of its global sales in the year through March and 51% in the first quarter of this financial year. They are the only two markets where Nissan sold more than 100,000 vehicles in the first quarter, with Japan, its home market, being the third-largest by sales.
While first-quarter sales remained even year-on-year at 787,000 vehicles, profit suffered due to deep discounts and increased marketing expenses as Nissan attempted to contend with competition and move cars off lots, particularly in the United States.
Nissan’s share price tumbled after the earnings announcement, at one point falling approximately 11% before finishing down 7% at 485 yen, marking its steepest one-day decline since February.
The automaker cited an ageing portfolio and a market shift to hybrid vehicles as factors hurting U.S. sales. These struggles in the world’s largest economy add to Nissan’s woes in China, where it is trying to regain ground amidst a price war with local giants.
Last month, Nissan announced it halted production at one of its eight Chinese factories, operated through a venture with local partner Dongfeng Motor, as it seeks to optimize operations.
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