EconomyFinancialThe day Nissan became a profitable brand again

The day Nissan became a profitable brand again

Ashwani Gupta, Director of Global Operations (COO, for its acronym in English) of Nissan, visited Mexico in mid-February to talk about the progress in the country of the automaker’s electrification strategy, called Ambition 2030.

The Japanese automaker announced in October a five-year, $17.59 billion investment plan to speed up the electrification of vehicles and thus catch up with competitors. This plan is the next step for Nissan after its finances hit rock bottom in 2019 – when it posted operating losses of 40.5 billion yen, about 330 million dollars at the current exchange rate – and had to announce a cut plan amid the scandal of the escape of his former CEO.

“We had dreams of selling nine million vehicles globally (from the 5.5 million Nissan sold in 2019) and we invested more than $7 billion to expand production capacity. But we lost focus and ended up in financial trouble,” says Gupta.

By the beginning of 2020, the Japanese automaker’s business model was crumbling: the resale value of its units was seriously affected by the incentives – bonuses and discounts – that the brand gave on a piece-rate basis and profitability was not good. In the midst of the financial crisis, it announced in May of that year, called Nissan Next , which included the exit from some markets –such as South Korea and Russia–, the reduction of the model supply –from 69 to 55– and the closure of of plants – in Spain and Indonesia – to reduce its global production capacity by a fifth in the next four years.

By mid-2021, the restructuring plan not only stopped losses, but started to turn a profit. In the accumulated of the first three quarters of fiscal year 2021, from April to December, Nissan’s net income was 53.2 billion dollars, operating profit of 1.6 billion dollars and net income of 1.7 billion dollars. After returning to the black numbers, Nissan was ready to think about the future.

“It was important for us to know what was going to follow after Nissan Next. We thought: ‘Ok, we are doing the transformation of the business, but what is going forward?’

The answer came in October 2021, with the launch of Ambition 2030 , which states that in the next five years, half of Nissan’s sales will come from electrified vehicles. For Mexico, it will mean the arrival of new electrified vehicles on sales floors – after eight years without any news on the matter – and, in the medium term, the reconfiguration of plants to make room for new technologies.

A twist in strategy

Nissan brought the Leaf, its first electric vehicle, to Mexico in June 2014. That year, the automaker broke a sales record with 291,729 units. However, the Leaf contributed less than 0.08% of the volume, according to data from the Mexican Association of the Automotive Industry. To promote its sale, the manufacturer invested millions of dollars in the installation of recharging centers and lobbied different instances of Congress for incentives. But it has failed to stand out in the country – in 2021 Nissan sold only 11 Leaf units, equivalent to 0.005% of the brand’s total volume, according to INEGI data – and the Japanese manufacturer has decided to turn its strategy around.

“Our understanding of electrification is now different. We want to enable the customer to decide which electrification option is right for their lifestyle. The purchase of an electric should be a consequence, not an imposition of the manufacturers”, says Gupta.

The most viable alternative that volume brands have found to ride the wave of electrification has been hybrids, in all their variables, from the ‘softest’ with mild-hybrid or traditional engines (such as Prius), to those that could already be considered almost electric, except that they use a small combustion engine to generate electrical energy that recharges the vehicle’s battery while it is running. Mazda and Stellantis have opted for mild-hybrids ; Toyota, Hyundai and Kia for the traditional ones, and Nissan will bet on the latest, a technology that the brand has named e-Power.

“In Mexico, we are going to have various technologies available. We are going to maintain the gasoline portfolio, introduce new (hybrid) technologies, such as e-Power, and maintain the electric ones, although to a lesser extent,” says José Román, president and CEO of Nissan Mexicana. .

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