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Nissan Slashing North American Production Due To Sales Drop

Industry News / 4 Comments

This is what happens when car rental agencies are some of your best customers.

According to the Nikkei Asian Review, Nissan intends to cut North American production by as much as 20 percent as a direct result of declining sales in the highly competitive US market. For the first time in eight years, Nissan's 2017 US sales took a dive, and the automaker is not about to take any chances in terms of over production. Therefore, it's already made production cuts at two US production facilities as well as three in Mexico. No employees have been fired so far, but many will be staying at home at least an extra two days per week.

Overall production output will drop by at least 10 percent. Hopefully, this production slowdown will end by fall, right around the time when the redesigned 2019 Altima sedan goes on sale. Along with the Altima, Nissan's other best-seller is the Rogue SUV. Nissan has been quite aggressive in the US in order to claim a bigger share of the market share pie since 2008. However, this strategy led to high-volume, low-margin sales to places like rental fleets. Generous sales incentives were another contributing factor. For example, Nissan's average incentive per vehicle last quarter was $4,000. The industry average was $3,600. On the one hand, this approach boosted sales, but harmed overall brand value in the long run.

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That strategy will end soon as both production volume and incentives will be lowered with the aim to shift "from a scale-based strategy to one focused on profits." The US is a vital market for Nissan, accounting for 28 percent of its global sales for the year that ended on March 31. Taking those production cuts into account, Nissan expects its US sales to drop by three percent for the new fiscal year.