TOKYO – Nissan Motor’s automotive business faces the possibility of running out of money over the next year and a half, as the pandemic exacerbates the company’s monetary difficulties and raises doubts about its long-term competitiveness.
“The money lost for our auto business this year will be negative,” said a Nissan executive. “If we continue to invest, we will have negative money at least until the first part of the next fiscal year.”
A year and a portion of the non-stop outings “could almost drain the money held through Nissan’s automotive business, which stood at 1 trillion yen by the end of March 2020,” said Takaki Nakanishi, director of the Nakanishi Research Institute. Net money is total money held through a less general corporate liability.
Nissan’s net money position is about to fall 91% to around 96 billion yen in the two years through March 2022, Nakanishi said. This would exceed the expected 8% decrease for Toyota or the 3% reduction for Honda.
The market on average predicts that Nissan will post an operating loss of more than 220 billion yen ($2.09 billion) for April-June when it announces results Tuesday, the automaker’s first time in the red for that quarter.
But unlike some compatriots like Toyota Motor and Subaru, who probably also recorded losses in the last quarter as the coronavirus outbreak breaks out, market watchers do not believe Nissan can escape the red until the end of the fiscal year. They predicted a record operational loss of just under 220 billion yen for the year ended March 2021.
Nissan’s complicated scenario stems from the overthrown President Carlos Ghosn on the scale. The automaker had reduced spending on the progression of new cars to expand unit sales, and the lack of exciting new models made it dependent on monetary incentives to attract new customers. Ghosn’s long control of Nissan ended after his arrest in 2018 due to monetary misconduct.
This scale strategy failed when consumers squeezed the ropes from their bags amid the pandemic. Sales of the company’s U.S. unit fell 45% in June, while Toyota and Honda Motor fell 23% and 12%, respectively. Nissan also presented $4,800 in vehicle-consistent incentives, well above the industry average of approximately $4,000.
Despite sluggish sales due to the coronavirus and a lackluster lineup, Nissan still needs to spend on research and development — raising concerns both inside and outside of the company.
Nissan spent about 540 billion yen on studies and progression and an additional 500 billion yen on capital investments in the year ended in March. Without sufficient net liquidity, it may be forced to reduce its investments in next-generation connected, autonomous, shared and electric cars, and fall more than its competitors.
The automaker points to this by collecting approximately 900 billion yen in loans and bonds in the last 4 months. Still, “we’re going to want more cash if there’s a coronavirus outbreak wave,” a Nissan executive said. The company also has a debt rate of about 2, more than double that of its competitors, and may have problems with other fundraisers.
Restoring your logo symbol will be critical to Nissan’s long-term recovery. The company unveiled a new sports car in June, with plans to launch a dozen models over the next year and a share in an attempt to win new fans.
But it remains to be seen how effective this strategy will be. Mitsubishi Motors, an equity-method affiliate of Nissan and a member of its alliance with French automaker Renault, said Monday that it expects a 360 billion yen net loss for the year ending March 2021. Many industry watchers await Nissan’s full-year forecast, especially as the threat of a second wave of coronavirus looms heavy.
Subscribe to our newsletters to get our stories right in your inbox.
You want a subscription for Array ..