Nissan Motor Co said on Sunday it aimed to boost its sales in Japan in a move that would also help reduce exports by as much as a third and reduce the impact of the yen’s crippling strength.
As the possibility increases for the yen to strengthen further after the downgrade of the U.S.’s credit rating, a Nissan Motor Co. executive said the Japanese auto maker aims to reduce exports from Japan to soften the negative impact from the stubbornly strong currency.
Nissan is looking to boost production for the domestic market to maintain the company’s pledged volume of one million vehicles a year, said Hiroto Saikawa, a Nissan executive vice president.
The strategy is part of the company’s efforts to meet its targeted operating-profit margin of 8% and global market share of 8% set under its business plan for the next six years.
“We’ll maintain a production volume of one million vehicles inJapanby using [domestic production] as our manufacturing center to enhance our competitiveness,” Mr. Saikawa said at the company headquarters in Yokohama, south of Tokyo.
The targeted ratio of exports to Nissan’s total domestic production will be still short of the industry’s leading level in Japan, possibly still leaving the company vulnerable to the yen’s rise.
Nissan isJapan’s No.2 brand with 13 percent of the world’s third-biggest auto market dominated by Toyota Motor Corp. In the business year to end-March 2011, Nissan sold 600,202 vehicles in Japan, of which 24 percent were Nissan-badged 660cc minivehicles built by other Suzuki Motor Corp and Mitsubishi Motors Corp.
Despite beingJapan’s No.2 brand, Nissan had just two models in the list of 10 best-selling vehicles last year excluding 660cc microcars, trailingToyotawith five and Honda Motor Co. with three.
Strong yen problematic
For Nissan and other Japanese car makers, the yen’s strength remains a big headache, as the currency stays near a record of ?76.25 against the dollar and threatens to become much stronger after a McGraw-Hill Cos. unit, Standard & Poor’s Corp., downgraded theU.S.’s credit rating Friday. A strong yen reduces the price competitiveness abroad of vehicles built inJapanand also deflates income from overseas markets when repatriated.
With the current levels of their local currency, Japanese car makers find it hard to export vehicles profitably from their home country.
Nissan estimates that each time when the dollar weakens by one yen, the move reduces the company’s annual operating profit by ?20 billion ($255 million). The company projects an operating profit of ?460 billion for the current fiscal year through March.
Still, Japanese auto makers seek to keep production in Japan as they believe advanced manufacturing technologies and skills owned by their home factories and suppliers will continue to help them build competitive vehicles.
Nissan is targeting the ratio of production for exports to its overall output inJapanof at least 50% or even 40% in the long term, Mr. Saikawa said. This 40%-50% ratio goal marks a steady drop from the 57% in the past fiscal year ended in March but won’t be significantly low when compared with the most recent ratios at local rivals.
The car maker aims to lower its dependency on exports in Japan as it already decided to move production of the Rogue small sport-utility vehicle to North America from Japan while it also plans to increase production capacity in emerging markets such as China.
In the first six months of 2011,?Honda Motor?Co. exported only 37% of its vehicles built inJapan. The ratio at?Suzuki Motor?Corp. stood at 28%, while Nissan had 62% and?Toyota Motor?Corp. logged 56%.
Nissan aims to increase production for the domestic market to 600,000 vehicles, which will lift the portion for the Japanese market to 60% of the company’s overall output in Japan. The company built 460,000 vehicles for its home market in the most recent fiscal year, 43% of its total production in Japan.
New models, including new compact, electric vehicles and other green cars, should help boost sales and therefore increase production for the Japanese market, Mr. Saikawa said.
As a first step, the car maker is already working to boost its domestic share to 15% by the end of March 2014 from 13% in the past fiscal year.
Middle East performance
Talking about the Middle East results, early in June, Nissan’s Chief Performance Officer, Colin Dodge, commented that in the region, ‘it’s basically good except for Saudi Arabia.’ In the fiscal year 2010, sales in the region were slightly up, increased to 180,000 units, as announced by President and CEO, Carlos Ghosn, in May rhis year.
Nissan is a leading automotive brand in the Middle East. It boasts one of the most popular and successful vehicle line-ups in the region. Nissan Motor Co. Ltd. became the first Japan-based car manufacturer to establish a regional Middle East HQ in June 1994. Nissan operations cover over 20 countries across the region making it one of the largest representations in the Middle East amongst Japanese automotive brands.
In the UAE, Arabian Automobiles Co. is the sole distributor of Nissan cars and genuine parts.
Sources: Reuters, WSJ, zawya, nissan-global