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March 20, 2019 05:09 AM

Nissan said to cut China sales target on lack of new models, slowing market

Tian Ying, Ma Jie and Kae Inoue
Bloomberg
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    Reuters

    Nissan cars are pictured at a storage area in Guangzhou, China.

    BEIJING/TOKYO -- Nissan is cutting a future target for China car sales by about 8 percent, people familiar with the matter said, as the automaker suffers from a lack of new models combined with a downturn in the world’s biggest vehicle market.

    Nissan and Dongfeng Motor now forecast that their joint venture will sell 2.39 million vehicles in 2022, the end of the current mid-term plan. That is a reduction of 220,000 units from the previous target, the people said, asking not to be identified because the outlook is not public. Including imports, they sold a total of 1.56 million vehicles in China in 2018, an increase of 3.4 percent.

    One key factor is that Nissan is in between models at a time when the market is weak. Passenger vehicle sales in the country fell 6 percent to 22.7 million units last year, the first decline since the early 1990s, while ongoing trade tensions with the U.S. threaten to dampen demand even further. No major new Nissan models are planned for the China market through 2020, and its luxury Infiniti brand plans no new vehicles through 2021, the people said.

    “Fresh new models are what keeps traffic coming to the showroom,” said Bill Russo, chief executive officer of Shanghai-based consultancy Automobility. “It’s especially true in hypercompetitive markets like China.”

    Nicholas Maxfield, a spokesman for Nissan, declined to comment on the new targets. A spokesperson for Wuhan, China-based Dongfeng said the company did not have any immediate comment. 

    China was a key priority for Carlos Ghosn, the former chairman of Nissan and its alliance with Renault and Mitsubishi Motors, before he was charged with falsifying financial information and breach of trust late last year. Ghosn, who was freed on bail earlier this month, has denied the charges.

    While Nissan CEO Hiroto Saikawa remains committed to China, he is embarking on a program to put profitability before growth, said the people. Saikawa has criticized Nissan’s strategy of offering above-average incentives and sacrificing profits for market share in the U.S. Given current conditions, this is probably the right approach, according to Janet Lewis, analyst at Macquarie Capital Securities.

    “The move by Saikawa to improve the profitability of sales, even if it means a lower market share, is correct,” Lewis said.

    Nissan’s mid-term plan calls for an operating profit margin of 8 percent on revenue of 16.5 trillion yen by 2022, with China contributing almost a third of revenue. Ghosn had pledged to invest $9 billion and introduce a slew of new electric vehicles, as Nissan vies with global rivals including Volkswagen Group and General Motors to become the largest electrified vehicle maker in the country.

    Drivers in China buy one of every two EVs sold globally, and every automaker there must meet strict output targets for new-energy vehicles or buy credits from rivals as the government moves to phase out gas guzzlers.

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