By on August 1, 2016

2016 Nissan Murano Front Three-Quarter, Image: © 2016 Seth Parks/The Truth About Cars

Nissan is closing in on its goal of owning 10 percent of the North American market, but it opened itself up to plenty of risk along the way.

The surging automaker beat rival Honda in sales during the first half of this year, but only because of boosted incentives and increased fleet sales, Bloomberg reports. Big volume doesn’t always mean big profits.

Beating Honda was always a goal of CEO Carlos Ghosn. That, and the 10 percent market share.

Right now, Nissan stands at 9.2 percent in the U.S. and 9.7 percent in North America (using sales figures from the first half of the year). With just under 800,000 U.S. vehicle sales during 2016’s first six months (according to Autodata Inc.), Nissan topped Honda by about 6,000 units. (TTAC’s ranking puts the gap at about 20,000 units, with Nissan’s first-half sales rising 9.1 percent, year over year.)

That sounds great, but the back story isn’t good news for Nissan’s bean counters. According to Bloomberg, fleet sales rose 42 percent between January and May, to a total of 175,505 vehicles. Most of those sales went to rental agencies, meaning reduced profit for Nissan and lower average resale values for its vehicles.

Incentive spending rose 6 percent in the first half of 2016, to an average of $3,400 per vehicle — less than half of what Honda spends to move its cars. Nissan’s strategy now looks a lot like General Motors’ old game plan, before that automaker shifted its focus to profit at the expense of market share.

A Nissan spokesperson told Bloomberg that the spike in fleet sales was due to a backlog of orders. However, the publication points out that the automaker wouldn’t have beat Honda without those sales.

Thanks to the boosted discounts and fleet sales, Nissan’s finances suffered. The automaker’s chief financial officer, Joseph Peter, recently said the company’s operating profit fell 9.2 percent in the fiscal first quarter (April through June). Part of the blame went to currency changes, but he couldn’t rule out the impact of incentives.

The strategy looks like a losing game, so Nissan plans to push higher-profit vehicles to offset losses on incentivized low-end models. Judy Wheeler, the automaker’s U.S. vice-president, told Bloomberg that the company will boost production of its Armada SUV in the second half of the year, at the same time that the 2017 Titan pickup enters the market.

[Image: © 2016 Seth Parks/The Truth About Cars]

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53 Comments on “Nissan’s Push for Greater Market Share Comes with a Big Cost...”


  • avatar
    CoreyDL

    “the company will boost production of its Armada SUV in the second half of the year, at the same time that the 2017 Titan pickup enters the market.”

    That seems pretty stupid, for a few reasons:

    1) The Armada is on its way out, due to be replaced by the Japan-made Patrol version of the Armada. Next year, I think.
    2) Nobody wants an Armada.
    3) The Armada isn’t any good.

    Unless they’re just trying to use up parts they’ve got left over, before ending production altogether?

    • 0 avatar
      Adam Tonge

      If you build it, they will buy….eventually.

      • 0 avatar
        CoreyDL

        How much profit is left after all the incentives and haggling, though? Or do they not care, because that’s on the dealer by then.

        The Armada and Expedition/Nav are two of the holdouts from the early 2000s Big Time SUV Trucks Era. I can’t think of any others which are as old.

        • 0 avatar
          Adam Tonge

          I don’t know. I would think that there would be some profit. The Expedition and Navigator are obscenely profitable. However, unlike the Armada, the Expigator had a heavy refresh for the 2015MY.

          I thought the Armada was supposed to be on the Patrol platform this month?

          • 0 avatar
            CoreyDL

            Lol, well apparently not. Unless they’re going to badge them as Armada Limited and sell them into next year alongside the new one?

            Not like they’re going to make the Patrol-based one here, it’ll be in JPN with the QX80. This movement alone makes me question the pricing for the new Armada, and if they’ll have to jack it up to cover production and transport costs.

            I am still not understanding this production push.

          • 0 avatar
            VoGo

            Autoblog just posted a review of the new 2017 Armada – essentially a softer Patrol.

          • 0 avatar
            CoreyDL

            I think they should have called it Patrol here, by the way. Not like Armada has some huge brand equity, it just conjures a dated truck (with rent-a-rimz usually) for people who even know what it is.

            This new Armada is essentially the replacement vehicle for those seeking a new Montero.

            http://www.autoblog.com/2016/08/01/2017-nissan-armada-first-drive-0876/

          • 0 avatar
            CoreyDL

            I hate how the back on the Patrolmada looks just like the Saturn Outlook. They need to fix that.

    • 0 avatar
      Michael McDonald

      I didn’t even realize you could still buy the Armada brand new. Lo-and-behold it is still on their website! Yikes!!

    • 0 avatar
      gtemnykh

      I think that with enough cash thrown at buyers (which is what they’re doing) the Armada is not too terrible of a proposition. The interior finally got a much needed update in ’14, and the rest of the truck is pretty solid reliability-wise, issues with cracking exhaust manifolds were ironed out a long time ago, and there wasn’t a whole lot else that went wrong with them to begin with (to my knowledge). For folks that need a true three row BOF SUV that can tow, a $35k Armada sounds like a steal compared to a $50k+ Tahoe, Sequoia, or Expedition. It all comes down to value: decently reliable, capable-enough, and much cheaper than the competition. The fact that it gets 13mpg and looks just like a 12 year old model takes a back seat.

      • 0 avatar
        CoreyDL

        I guess I didn’t realize they were -that- cheap. I’ll have to check out interior pics, because the last ones in my mind were quite similar to the insides on the Pathfinder.

        • 0 avatar
          gtemnykh

          Cheapest new 4wd SV that I see for sale on the east coast is about $36,500. If you want to kick it Hummer style and get the RWD model you can roll off the lot for less than $32k as advertised (SV trim). Having said that, these are leftover unsold ’15 trucks.

          • 0 avatar
            CoreyDL

            It REALLY needed that 2013 interior update. The ones prior just look unacceptable in there, giant swaths of silver painted plastic.

            They seem to hold their value okay used. Similar to a lower-end Tahoe/Yukon.

          • 0 avatar
            Adam Tonge

            The cheapest Expedition I can find is $46K. Jeez.

    • 0 avatar
      Seth Parks

      CoreyDL – Keep an eye out for our 2017 Armada first drive, publishing shortly. The 2017 continues in name and market segment only.

    • 0 avatar
      ssjoeloc

      New Armada is already being showcased by NNA and is in production but will not hit dealers until September in most markets. Old Armada has been done for months but leftover inventory is still around if you look.

  • avatar
    sportyaccordy

    I still don’t understand the obsession with market share, especially at the expense of profit. Shareholders don’t give a crap about market share. You could increase market share a lot by just giving cars away. Seems short sighted.

    • 0 avatar
      Truckducken

      Yeah, you’d think that the history of chasing market share at GM, VW and Toyota would give them pause. If a recession hits so they can’t keep buying customers, these guys are going to fail hard.

      • 0 avatar
        VoGo

        I think it’s fine to go for marketshare if your product quality is significantly above average. You may have bought consumer’s business the first time, but if they are happy, they will be loyal, and come back time and again, regardless of price.

        I think this is what Hyundai did to climb out of the mess they made with $3,999 Excels. Today, they are a strong selling, mainstream carmaker because the people who bought on price the first time were not disappointed with the quality.

        So this is Nissan’s issue. In most categories, they lag market leaders Honda and Toyota on reliability, comfort, ease of use and other little things that add up over the life of a vehicle. Which means this grab for market share won’t end well for Nissan.

    • 0 avatar
      bd2

      It’s not just market share for the sake of market share.

      Part of an automaker’s profitability outlook is keeping its factories humming at or at least near capacity.

      The rise in GM’s profitability of late is due in part to the cut back in excess production capacity.

  • avatar
    yamahog

    “…Incentive spending rose 6 percent in the first half of 2016, to an average of $3,400 per vehicle — less than half of what Honda spends to move its cars”

    Honda spends over $6,800/vehicle on incentives? Is that right? Has anyone purchased a honda recently – was that your experience?

    I thought the Civics were selling near-sticker and Accords were selling maybe $1,500-$3,000 (for the loaded V6 cars) under sticker?

    • 0 avatar
      05lgt

      The overall tone of the piece and the words in that sentence go in opposite directions. I’m thinking it’s *not right*, but don’t have the resources to verify it.

    • 0 avatar
      JMII

      Incentive spending rose 6 percent in the first half of 2016, to an average of $3,400 per vehicle — double what Honda spends to move its cars

      – I bet the above is what he meant.

    • 0 avatar
      Felix Hoenikker

      Two years ago, I secured a $1500 discount on a new L trim Accord. At that time, the local Nissan dealer was willing to knock $5000 off a mid level trim Altima when I looked at the sticker on the Altima. But the Honda had more features so it was pretty close on price when adjusting for content.

  • avatar
    PrincipalDan

    Well playing around on TrueCar I did recently discover that the cheapest price listed for a V6 midsize sedan was for an Altima. Stacking them deep and selling them cheap on the retail side too.

    Too bad my local Nissan dealer has a reputation as the scum of the earth.

    • 0 avatar
      gtemnykh

      “Too bad my local Nissan dealer has a reputation as the scum of the earth.”

      To varying degrees, this has been my experience as well.

      We’re talking Mitsu-dealer level shadiness.

    • 0 avatar

      I checked out Nissan’s couple of times. First time when Altima was a new sensation on the midsize market. Sales guy was a Russian 20 something years old boy and was diehard Maxima fan (many Russian were back then). He knew everything about car. And I actually liked the car. But dealership (in Hayward CA) was run by Afgan drug overlords. One of them shouted at poor guy and told him in front of me that he will fire him if he spends so much time with one customer without delivering results again. Poor guy was truly scared. Needless to say that I never stepped into another Nissan dealership until few years ago to check out new full size Maxima which I did not like at all because it was such a pig and low quality. And again sales guy was young Russian fellow and I felt that he was embarrassed by how bad car was when I was pointing out numerous flaws while test driving it.

      Mitsu dealerships are much worse than Nissan’s but Nissan is getting there.

  • avatar
    slavuta

    Now I understand why Murano is overpriced by $10K

  • avatar
    SCE to AUX

    More cars = more service revenue (and not just for stuff breaking).

    My limited experience with Nissans has been quite good for reliability.

  • avatar
    Pch101

    Nissan has no choice but to compete on price. The marketplace figured out at some point that Honda and Toyota both had a quality advantage over Nissan, and has priced things accordingly.

    It’s not a terrible strategy. It’s splitting the difference between the low-quality/high-fleet reputations of the domestics and high-quality/not-quite-a-bargain positioning of Toyota and Honda, and there is a market for that. Nissan never quite fell to the levels of General Motors or the 1980s-era Hyundai, so complete redemption isn’t required.

    • 0 avatar
      bd2

      Toyota is also selling on price (and fleet sales) – at least for its cars like the Yaris, Corolla and Camry.

      • 0 avatar
        kit4

        Toyota’s incentive spending Is one of the lowest in the industry and fleet represents less than 10% of its sales. And a higher percentage of Camrys go into retail buyers than Sonatas. Try again.

        • 0 avatar
          bd2

          In 2013 when the current Camry was still relatively new (launched late 2011), Toyota sent 66,477 Camrys to rental lots.

          While the % to rental fleet was lower than others, in total numbers, that was the midsize sedan MOST often found on the rental lot (even more so than the Malibu or Fusion – which are domestic brands).

          And furthermore, the still relatively new Camry had a LOWER ATP than even the OLD Chrysler 200 (only mainstream sedan to have a lower ATP than the Camry was the Dodge Avenger).

          Toyota’s fleet % being around 10% has to do with the low fleet rate for its SUVs and crossovers.

          The Corolla and Camry have had fleet % rates in the 16-18% range and the Yaris being around and over 50%.

          And like Nissan, Toyota has been subsidizing sales of its sedans with the higher margins they have been getting on their trucks, SUVs and crossovers.

          Try to get a more complete picture next time.

          • 0 avatar
            JohnTaurus_3.0_AX4N

            ^bd2, preach on, brother.

            Toyota defenders will stop at nothing to prove their arrogance is well-founded in Toyota’s superiority. Its pretty easy to forget facts that disprove such when you’re too busy congratulating yourself on leasing your 11th Camry in the last 15 years, because they’re SO RELIABLE, you gotta UPGRADE every time they decide to throw on a new front/rear facia and call it the NEW Camry! Its BOLD because they say it is. Its super sporty, and it has the gaudy body kit to prove it isn’t a bland, boring, snoozefest of a car compared to damn-near anything BUT an Altima.

            You want cheesy wheel covers where others give you alloys? You got it, Toyota!
            You want a state-of-the-(1994)-art 4 speed auto in your “all-new” mid-2010’s compact? Oh, What a Feeling!
            You want a decent subcompact with a Toyota badge? Everyday, people at Mazda’s Mexican factory will build you one. Everyday.
            You want the bed-mounted surface-to-air missle launcher package with free infidel guide with your new truck? Well, go outside North America and buy a Hilux, then Let’s Go (Blow Up) Places.

          • 0 avatar
            bd2

            In certain ways, Toyota has become like the GM of old.

            Good thing that Toyota has (by far) the largest truck, SUV and crossover lineup among the import brands – or else, they would be hurting a lot more.

            There’s a reason why (despite having been the #1 automaker in the world), they are selling a rebadged Mazda and a coupe that was developed by Subie.

            Just compare the Yaris, Corolla and Camry to the Fit, Civic and Accord.

            Honda just keeps chugging along, not dependent on heavy discounting or fleet sales.

  • avatar
    Kenmore

    I like Honda people!

    I don’ like thee Nissan peoples so much.

  • avatar
    Jerome10

    You know…I’m getting the 2008 bubble vibe in different areas of the economy a lot lately.

    When you start seeing incentive levels rising like this, increases in subprime borrowing, chasing market share at the expense of profits, etc etc…. you know things getting a little frothy.

    Probably due for another economic explosion at some point again.

    I don’t run a global auto company, but I can’t help but think playing fast and loose with profits and handing out money to people who may not pay it back can be good for business in the long-term.

  • avatar
    stodge

    Any discounts in Canada for the Maxima or Murano?

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