Business

Nissan to cut EV production costs to compete against Chinese rivals

Japanese carmaker aims to make electric vehicles more affordable but still profitable in new manufacturing strategy

Nissan plans to slash the cost of manufacturing its electric vehicles by 30 per cent as the Japanese carmaker turns to new partnerships and manufacturing methods to counter the rising threat from Chinese rivals. Photograph: PA

Kana Inagaki
Mon Mar 25 2024 - 07:18

Nissan plans to slash the cost of manufacturing its electric vehicles by 30 per cent as the Japanese carmaker turns to new partnerships and manufacturing methods to counter the rising threat from Chinese rivals.

Nissan, which has an alliance with France’s Renault and a partnership with Honda that was announced last week, has wrestled with flagging sales in China as the automotive industry struggles to build profitable battery-powered vehicles at affordable prices.

Following months of delay, Nissan released a business plan on Monday addressing how a carmaker of its size – with annual sales of fewer than 4 million vehicles – would finance the costs of new technology development and survive the transition to electric cars. The strategy aims to lift annual sales by 1 million units by the end of its fiscal 2026 year.

Under the plan, Nissan will launch 30 models over the next three years, about half of which will be electric vehicles and hybrid cars. In China, it will launch eight “new energy” vehicles and begin exporting cars made locally from next year.

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In North America, it aims to sell 330,000 more vehicles in fiscal year 2026 compared with 2023, while India will become a pivotal hub for car exports.

The carmaker will also aim to launch an electric vehicle powered by solid-state batteries in fiscal 2028.

“Faced with extreme market volatility, Nissan is taking decisive actions guided by the new plan to ensure sustainable growth and profitability”, its chief executive Makoto Uchida said in a statement.

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The new business strategy comes after Nissan surprised investors by striking a partnership with its historic rival Honda to develop electric vehicles, in a bid to address the coming wave of high-tech, low-cost models from China.

The group will maintain its long-term alliance with Renault and Mitsubishi Motors in certain markets such as Europe, south-east Asia and Latin America.

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However, investors have questioned the future of the trilateral partnership after the French carmaker recently reduced its 43 per cent stake in Nissan to 15 per cent.

Nissan will aim to make electric vehicles more affordable and still profitable by developing the models in family groups, integrating components, cutting procurement costs and advancing battery technology.

It plans to make the cost of producing electric cars the same as for traditional combustion engine vehicles by fiscal 2030.

In a recent report, Boston Consulting Group estimated that carmakers currently lose around $6,000 (€5,500) on each electric vehicle they sell in the US for about $50,000, after accounting for customer tax credits.

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In February, Nissan cut its annual sales target for the fiscal year ending in March from 3.7 million to 3.5 million vehicles, due to weaker-than-expected sales in China, the United States and Europe.

Analysts have said its new business plan needs to address how the company will shore up its operations not just in China but also in the US, where Nissan has failed to benefit from a boom in hybrid vehicle sales due to a lack of offerings. - Copyright The Financial Times Limited 2024

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