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Nissan (NSANY) Plans to Decrease Vehicle Production in China

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Per Reuters, Nissan Motor Company (NSANY - Free Report) will slash vehicle production in China to survive the slackening economy. Over the three-month period beginning in December, the company is likely to reduce initial vehicle production by 30,000 units. However, the planned production target for the three months is not known yet. From December 2017 to February 2018, Nissan produced 400,000 units in China.

Reportedly, the Japanese automaker has plans to cut production at three of its factories in China, including plants in Dalian and Zhengzhou. The Dalian hub manufactures Nissan’s well-known Qashqai and Infiniti QX50 SUV crossover models, while X-Trail SUV crossover and Venucia models are manufactured at the Zhengzhou plant.

China is the second-largest auto market for Nissan, having contributed one-fourth of the company’s annual global sales. In 2017, the company sold 1.5 million vehicles in China and has set a target to sell 2.6 million units by the end of 2022. Earlier in August, the company announced its plans to expand its vehicle manufacturing capacity in China by 40%. For this, the company planned to invest $900 million, of which, $8.73 billion will be allocated to expand its footprint in China.


Nissan Motor Co. Price and Consensus


However, plunging vehicle demand on the back of slackening economic growth, and the ongoing tariff-war between the United States and China are hampering the top line of many auto manufacturers, including Nissan. In the 11-month period ended November 2018, Nissan’s vehicle sales grew 3.9% compared to a 12% rise witnessed in the same period of 2017.

Apart from China, the company is also witnessing a sharp sales decline in the United States. During the year, a continuous plunge in sedan sales has trimmed Nissan’s top-line growth. In the first 11 months of 2018, the company’s Versa sedan recorded a year-over-year sales decline of 30.7%. Waning profitability in the country prompted this automaker to cut vehicle production in North America by about 20%.

Nissan has plans to improve the bottom line by implementing production cuts in North America, in addition to raising sales in China, which is the biggest auto market in the world. However, the decline in China’s auto sales over the past few months places Nissan in a strained situation.

Price Performance

Nissan’s stock has lost 18.5% over the past six months, underperforming 22.9% decrease recorded by the industry it belongs to.


Zacks Rank & Stocks to Consider

Nissan currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the auto space are Fox Factory Holding Corporation (FOXF - Free Report) , Allison Transmission Holdings, Inc. (ALSN - Free Report) and Cooper Tire & Rubber Company (CTB - Free Report) . Fox Factory and Allison Transmission currently sport a Zacks Rank #1 (Strong Buy) while Cooper Tire carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Factory has an expected long-term growth rate of 5%. Shares of the company have rallied 24.6% in the past three months.

Allison Transmission has an expected long-term growth rate of 10%. Shares of the company have increased 7.8% in the past three months.

Cooper Tire has an expected long-term growth rate of 4%. Over the past three months, shares of the company have gained 12.1%.

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