Nissan has long-standing tradition in North America of being a bargain brand. While the automaker fields plenty of affordable options with a base MSRP undercutting that of its rivals, it has also leaned on aggressive incentivizing and heavy fleet sales. This helped Nissan chase volume in the U.S., but CEOÂ Hiroto Saikawa is no longer convinced it’s a winning strategy.
He’s taskingÂ Denis Le Vot, Nissan’s new North American boss, to improve profitability and brand value after the company’sÂ operating profit dipped 50 percent in the region in the last quarter of 2017.
It’s a tall order forÂ Le Vot, who has only had a little over one month to settle into being the regional chairman for the brand, andÂ Saikawa is only giving him another two to figure out how to pull it off. However, he’s hinting at a strategy that eases off dealers, offers fewer market incentives, and ditches a reliance on fleet sales.Â
“We have to first improve the brand value and profitability,” Saikawa said in an interview with Automotive News last week. “Hopefully, we will be able to reach a very solid point in two years. This is the first mission for the new chairman.”
It’s a lot forÂ Le Vot to take on, especially considering North America’s automotive market has been cooling off for over a year now. However, luxury brands haven’t felt the pinch quite as strongly. In fact, Infiniti’s U.S. sales grew from 138,293 units in 2016 to 153,415 in 2017Â â€” a new annual record for the brand. January was a different story, however, as Nissan’s monthly volume rose 10 percent while Infiniti sales fell by 8.
Still, Nissan was hardly crippled by low volume in 2017 â€” the company set a global sales record last year. But Saikawa claims the automaker bolsteredÂ factory output to feed a higher demand that never came. Combine that with hefty low-margin fleet sales and dealerships annoyed by having to play into the big incentives game, and the home office isn’t happy. All things considered, things could be far worse. The brand isn’t facing a crisis so much as it’s hunting for profits and trying to avoid a disaster that could materialize later on.
“The team has been so used to more production and piling up of the supply side, then the wholesale. And with the [total industry volume] very good, it was relatively easier to sell,” Saikawa said of Nissan’s seven-year run of annual gains.Â “But, when the U.S. team is so used to that, they were a bit late to start action in adjusting.”
That leavesÂ Le Vot to decide how much of the baby to throw out with the bathwater. While it’s unquestionable he’ll need to fix the brand’s bloated inventories (it had a 319,900-unit surplus at the start of the month â€” a number it hopes to drop to 100,000 by the end of March), the jury’s out on how far he’ll go in tweaking Nissan’s Western strategy. It’s a strategy that has worked well enough for the last decade.
Unlike his predecessor, Saikawa says he isn’t interested in market share. He’s only concerned with increasing residual value. Nissan has a 65-day supply of vehicles and an average incentive spend of $4,500 per vehicleÂ â€” about $500 higher than the industry average. Both of these are elements Saikawa believesÂ Le Vot will have to change as soon as possible.