Nissan's production cut: Is it a sign of trouble for the Japanese automaker?

Nissan has cut production planned for this month at its flagship Japanese plant by a third, also reducing production of its key crossover model. According to sources, the main reason for this decision is weak demand in the US market, which is affecting Nissan's older model lineup.

Image Credit: Nissan

Nissan's stock price fell 3% on Friday, reflecting the severity of the problem. The company reported a nearly complete loss in April to June profits and cut its full-year outlook after offering heavy discounts in the US.

Nissan's rivals Toyota and Honda offer hybrid models in the US, but Nissan has not benefited from this growing demand due to the lack of hybrid models in its lineup. The recent shift in US consumers towards hybrids has added to the problems for Nissan.

According to sources, Nissan now plans to produce about 25,000 vehicles this month at its Kyushu plant in southwest Japan, a third of planned production. Due to the reduced production, line workers at the Kyushu plant are working a little more than seven hours a day, down from the usual eight hours.

Nissan had 2023 models of the Rogue left in the US and was finding it difficult to sell them with the roll-out of 2024 models. Aggressive promotions had to be offered to sell 2023 models, while aggressive promotions of higher-margin models in 2024 had to be put on hold.

Nissan announced in March that it would launch 30 new models over the next three years and aim to increase global sales by 1 million vehicles. Nissan sold about 3.4 million vehicles globally in 2023, up 5% from a year earlier.

However, according to Nissan analysts, times could be tough for the company given the growing demand for hybrid models in the US. Nissan has said 16 of its 30 planned new models will be electric, including eight EVs and four plug-in hybrids.