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Fundamental View
AS OF 27 May 2025Nissan unveiled their second strategic plan in as many years, with the Re: Nissan Recovery Plan under new CEO Ivan Espinosa focused on sweeping changes to the company’s manufacturing footprint and cost structure. We believe the plan comes with a high degree of execution risk considering execution has been a major organizational weakness in recent years. Lacking in the recovery plan, in our view, was updated details of its hybrid vehicle development and introduction targets, which would address a hole in its product lineup in a fast-growing global segment. While we are hopeful the Re: Nissan Recovery Plan succeeds, and we will be rooting for management to flawlessly execute the plan, we view currently view the plan as a “show me” story until we gain confidence in their ability to execute.
Business Description
AS OF 27 May 2025- Nissan, with headquarters in Yokohama, Japan, is a leading global automotive manufacturer with a market presence in many countries around the globe. The company’s growth investments are focused primarily on Japan, North America, and China, core markets with large profit pools in which Nissan has a meaningful market share. The company’s business in China is conducted through a joint venture with Dongfeng Motor Corporation.
- Nissan’s Sales Financing segment supports the sale of its vehicles by providing financing solutions to its customers and dealers. To enhance their creditworthiness, Nissan maintains keepwell (support) agreements with its wholly owned financial subsidiaries including Nissan Motor Acceptance Corporation (NMAC) in the United States and Nissan Financial Services (NFS) in Japan.
- The Renault-Nissan-Mitsubishi Alliance was established in 1999 to enhance member company scale in product development and raw material purchasing. The alliance includes equity participation, which led to Nissan holding ownership stakes in Renault (15% non-voting) and Mitsubishi (34%) and Renault holding an ownership stake in Nissan (43%). The Alliance’s automobile production volume is the third largest globally behind Toyota and Volkswagen.
Risk & Catalysts
AS OF 27 May 2025Management provided FY25 guidance for production volumes, retail sales, and consolidated operating profit, noting the guidance excludes tariff impacts. However, it noted its guidance for operating profit, net income, and automotive free cash flow is preliminary owing to uncertainty related to the potential impact of tariffs and additional restructuring costs that are currently being assessed. More broadly, the company is viewing FY25 as a year of transition that will set the stage for achieving positive automotive operating profit and free cash flow by FY26.
The company expects to produce and sell 3% fewer vehicles in FY25 than it did in FY24. The retail sales decline expectation is driven by lower projected sales in China, which management expects to decline by about 18%. Global production volume is expected to decline to 3.0 mn units to manage dealer inventories based on the company’s lower retail sales outlook. The company expects revenue to decrease 1% in FY25 as lower volumes are partially offset by improved sales incentive management and favorable pricing related to new model launches in 2H25.
Key Metric
AS OF 27 May 2025JPY bn | FY20 | FY21 | FY22 | FY23 | FY24 |
---|---|---|---|---|---|
Revenue | 6,843 | 7,393 | 9,573 | 11,524 | 11,371 |
EBIT | (471) | (42) | 242 | 409 | (54) |
EBIT Margin | (7%) | (1%) | 3% | 4% | (0%) |
EBITDA | (201) | 247 | 559 | 760 | 309 |
EBITDA Margin | (2.9%) | 3.3% | 5.8% | 6.6% | 2.7% |
Total Liquidity | 4,096 | 3,601 | 3,658 | 4,196 | 4,272 |
Net Debt | (636) | (728) | (1,213) | (1,546) | (1,499) |
Total Debt | 1,260 | 973 | 687 | 468 | 661 |
Gross Leverage | n/m | 3.9x | 1.2x | 0.6x | 2.1x |
Net Leverage | 3.2x | -2.9x | -2.2x | -2.0x | -4.8x |
CreditSight View Comment
AS OF 02 Jul 2025Our Underperform recommendation on Nissan Motor and Nissan Motor Acceptance Corporation (NMAC) notes is based on our view the notes are subject to downside risk from the recently enacted US auto import tariffs that could thwart its profit improvement initiatives in the US and potentially extend its recovery process. The major risk to our underperform recommendation is a potential partnership with Foxconn, KKR, Tesla, or Honda, the latter of which could lead to expectations for a near-term rating upgrade back to investment grade.
Recommendation Reviewed: July 02, 2025
Recommendation Changed: February 26, 2025
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