Why Is Nissan Cutting Prices?

One of the bigger stories of 2013 has so far managed to escape the news cycle. I’m not exactly sure why Nissan’s announcement of significant reductions on the MSRP of new cars hasn’t gotten more coverage, but I’m also not 100 percent sure of Nissan’s motives either.

The Canadian Press, one of the few outlets to cover the news, does a good job of not burying the lede here

Nissan is cutting prices on seven of its 18 models in the U.S., hoping its cars and trucks will show up in more internet searches by shoppers. The price cuts vary with the amount of equipment on each model. They run from 2.7 per cent, or $580 US, on the top-selling Altima midsize car to 10.7 per cent, or $4,400, on the Armada big SUV. Executives are under pressure to sell more cars, with Nissan’s CEO targeting a 10 per cent U.S. market share within three years.

Nissan is aggressively pursuing their marketshare goal with VW-like fervor; witness the revamp of almost all of their products, which have become even more oriented towards the tastes of American consumers (if such a thing were possible). The Altima, once the original Japanese mid-size muscle sedan, is now just another generic entrant, while the Pathfinder, criticized by armchair off-roads for becoming a crossover, is pretty good at fulfilling its duties as a family hauler that looks like an SUV.

Apparently, Nissan felt that the sticker prices of their cars were too high to be competitive in online car shopping searches. Nissan must want to get in front of consumer eyeballs badly enough to incur the massive pain-in-the-rear that comes with such a move. Since the discounts only apply to cars about to be shipped to dealers (and extended indefinitely), cars currently sitting on dealer lots will get some serious incentives to help dealers move them.

Our industry sources tell us that this will cost Nissan about $100 million, about the same price tag as a new model development program for many manufacturers. This is not a small expenditure, even for a firm as big as Nissan. But it does highlight the importance that many manufacturers are placing on volume, which, in the absence of decent margins, is seen as the way to make money building cars.