Yahoo Autos Volume no longer a dirty word as Nissan looks to grow again
324,893 cars were built at Sunderland last year, led by the Qashqai and Juke
Nissan’s new Arc global mid-term plan carrying it to 2026 included a promise that we haven’t heard from a manufacturer for a while: it wanted to lift annual sales by a million.
The announcement last week included an admission by CEO Makoto Uchida that the mid-term plan it succeeded, called Nissan Next, had a flaw.
The goal of increasing volumes used to be staple of car makers’ forward-looking plans, but in recent years it has become unfashionable, replaced instead by the now well-worn phrase ‘value over volume’.
That mindset preferred sales quality over quantity, removing discounting in favour of selling better-equipped models for higher prices. Volumes were sacrificed for increased profit margins, or so the theory went.
That was achievable during the post-Covid supply chain shortages, when no one could build enough cars to meet demand, thereby raising average selling prices.
The problem in the longer term, however, is that unless you can shrink your factory network to meet the lower sales volumes, the unused production capacity becomes a lead weight on profits.
Uchida praised the work done on profit margins during Nissan Next (they went from underwater during the pandemic then rose to 5.2% in the nine months to the end of December 2023) while also pointing out the plan’s “flaw”.
“With our focus on quality of sales and financial discipline, we were able to achieve strong profit levels. However, our volume remained flat.” Uchida said at the Arc event. “Therefore, in order to ensure steady progress, we would like to boost the fundamental volume.”
Nissan’s sales volumes have fallen substantially over the past decade or so. In the 2015 financial year, ending March 2016, it sold 5.4 million vehicles. In the current financial year, ending in March, it predicts it will sell 3.5m, up from 3.3m the previous year.
Under former CEO Carlos Ghosn, Nissan was a firm believer in production scale – build more, sell more and discount if you need to stimulate growth.
Ultimately, Ghosn believed, the margins would come from the manufacturing efficiency of having plants humming along at full strength. It worked for a while, but his targets were too ambitious, leading to model failures like the lacklustre Nissan Pulsar family hatchback.
Created to deal with plummet in sales in the immediate aftermath of the pandemic, the Nissan Next plan called for a reduction in the company’s production capacity to 5.4m vehicles, down from a whopping 7.2m in 2019. That it achieved, partly from restructuring or closing plants, including that in Barcelona.
Nissan is still running under capacity on production volume, but instead of closing more plants, it intends to fill them again. Right now its factories worldwide are running at just 68% capacity including its underperforming Chinese plants or 78% excluding them, the firm said.
By boosting volumes by another million globally, Nissan believes it can run at 91% capacity, helping it achieve 6% margin by 2026 then 8% by 2030.
