Nissan Motor Co. NSANY expects to rebound to profitability in 2021 as auto sales in China continue to recover post the coronavirus pandemic.
For the first time in a decade, the company reported a first-quarter loss of 56 cents per share in 2020 amid the pandemic-induced sluggish economy. This was followed by a steeper second-quarter loss per share of $1.02. Moreover, the company’s sales in the June-end quarter plunged 49.4% year over year.

Nissan has been struggling to survive the coronavirus crisis-induced meltdown in vehicle demand.  The company’s recurring sales slump also threatens the stability of its alliance with Renault SA and Mitsubishi Corp. MSBHY.

Nissan — Japan’s second-largest carmaker — even sought emergency loans from the state-backed Development Bank of Japan which represented the largest ever state guarantee to a Japanese corporation.

Moreover, the loss-making carmaker is facing financial misconduct charges related to the under-reporting of its former chairman Carlos Ghosn’s compensation.

China’s Auto Sales Up After a Prolonged Slump

China’s auto market has been faltering since July 2018 due to the tighter emission standards, trade tensions, increasing popularity of ride-sharing platforms and economic downturn. The COVID-19 outbreak that originated in Wuhan further aggravated the prolonged demand slump, as is evident from the biggest ever decline of around 80% year over year in February. Auto sales slump was less dismal in March, with volumes dropping 43% year on year. As coronavirus concerns marred showroom traffic, automakers in China suffered their bleakest ever quarter from January through March, with sales tanking 42% year over year to 3.7 million vehicles.

However, vehicle sales in China climbed in April, putting an end to the 21-month slump. Being the first country to emerge out of the deadly coronavirus, lockdown in many cities in China got lifted when other cities in the world were either in the shutdown mode or entering it.

Car sales in China for August grew for the fifth month in a row and electric vehicle (EV) sales in the country witnessed the second consecutive month of gain. Per China Association of Automobile Manufacturers (“CAAM”), auto sales for August rose 11.6% year over year to 2.19 million units.

Road Ahead For Nissan

The Japan-based automaker plans to expand its presence in the recovering Chinese auto market, which is a crucial market for the company’s output.

Nissan plans to roll out nine new and re-modeled electric vehicles in China by 2025, including plug-in electric vehicles and hybrid electric cars equipped with a gasoline powered engine. In order to capture the largest automobile market worldwide, Nissan anticipates to launch more models than initially planned in the Chinese auto market.

At the 2020 Beijing motor show — one of the biggest events on the automotive industry calendar — Nissan rolled its all-electric Ariya SUV, which, per the company, can travel up to 610 kilometers (380 miles) on a single charge. The company also unveiled its Formula E race car and the GT-R50 by Italdesign.

Recently, the Yokohama-based automaker showcased its luxury car brand Infiniti’s new design concept for the QX60 Monograph, a deluxe sports utility vehicle.  

Furthermore, Nissan is focused on launching 12 new cars in the upcoming 18 months to revive its dull vehicle fleet.

Thus, Nissan aims to boost sales and profitability by 2021 with its commitment to expand the company’s foothold in the rebounding China auto market along with the aim of refreshing the vehicle lineup.
Notably, Japan-based auto biggies like Toyota TM and Honda HMC registered double-digit gains for August car sales in China, while Nissan’s auto sales slid 2.6% year over year.

Currently, Nissan carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have declined 40.6% year to date, underperforming the industry’s fall of 6.2%.

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