Car Industry

Nissan's US operations are still having a rough go of it, report says

Fleet and rental sales, alongside deep consumer discounts, are hurting the brand and upsetting dealers.

Nissan's Pathfinder is among the models in its lineup that are in serious need of a refresh to keep up with the competition.

Chris Paukert/Roadshow

It would be absolutely fair to say that Nissan has had a pretty bad year so far. It is down a few of its most powerful and influential leaders, and a side effect of that has been a sharp downturn in profits and margins that are in the toilet, figuratively speaking.

A big chunk of Nissan's problems are coming from the US, according to a report published Tuesday by Reuters. The brand has had repeated troubles meeting its commitments to dealers and years of rental fleet sales have done tremendous damage to resale values.

How then does Nissan USA plan to go from a reported 45% drop in operating profit and profit margins in the range of 1% or 2% (according to CEO Hiroto Saikawa, during a press conference this week) being something akin to the powerhouse it was during the Japanese car boom of the 1990s?

The first step is to cut the rental and fleet sales, which is something that it had promised dealers it would do. Nissan pledged to its US dealers that it would slash fleet sales from around 40% to between 15% and 17% by 2022. So far, though, dealers say that process hasn't started.

According to Reuters, Nissan hasn't provided its dealers with much else in the way of a turnaround plan either. Nissan has been working its way through its product line, refreshing models as it goes, but it still has a long way to go before that process is done.

Some of the refreshes have been great, in particular, the longer-range Leaf Plus and the new Altima, but it's not clear yet if those changes are going to be enough to bring buyers back to the brand during a period where overall demand for new vehicles is falling.

Unfortunately for Nissan, its models in many of the areas of the market where new car sales remain strong -- pickup trucks and SUVs for example -- have yet to see those much-needed updates. Both the Titan and Pathfinder, for instance, are showing their age and their sales seem to reflect that.

Other than fleet sales, the big weapon that Nissan has been leveraging to sell its cars in the US has been with deep discounts. These artificially low prices have helped get people into dealerships but have hurt vehicle resale values.

As Reuters points out, other Japanese manufacturers like Honda and Toyota dole out discounts sparingly to maintain their customers' resale value. Brands like Nissan and American makes like Ford and Chrysler discount their vehicles heavily, and resale values are comparatively low as a result.

"We are working to improve the quality of sales and reinvigorating our product line-up. From FY18-20, we will redesign 70 percent of the Nissan portfolio to make it one of the freshest in the industry," Nissan representatives told Roadshow. "Nissan is focused on providing leading technology that our customers want onboard these new vehicles, such as ProPILOT Assist and the suite of advanced safety features we call Safety Shield 360. Our management is committed to rebuilding our relationship with our dealers to ensure an outstanding experience for our customers.

If all this comes off as a bit grim for Nissan's US branch, then it's only because new Nissan USA boss Jose Valls has his work cut out for him. Nissan plans to unveil seven new or refreshed models over the next two years, and it's going to be his job to convince dealers to stick around for that with promises of real change from the company as well as genuinely competitive product.