Autos

Nissan Cuts Incentives, Sells More Cars


In the market for reliable, affordable, point A-to-point B automobiles, Nissan (7201:JT) is quickly catching up to Honda (7267:JT) and Toyota (7203:JT).

In the first half of the year, Nissan shot by Hyundai (005380:KS) in U.S. sales, moving 704,500 cars, a 13 percent increase over the same period a year earlier. Honda sold 739,400 vehicles in that time, but Nissan bested its Japanese rival in both February and March.

Make no mistake, this is impressive. Companies such as Nissan, Honda, and Toyota aim squarely for the middle of the market in every way, from pricing to design. Although they all have luxury brands, their mainstays are the superreliable, somewhat bland sedans and crossovers built for buyers who don’t want to pay for a fancy badge on the hood. The sheer volume of buyers who fall into that category makes major gains in market share hard to come by. Nissan, however, is finding some.

Nissan is getting two things right. Most notably, it’s making some good vehicles. The Altima, overhauled for 2013 and updated for 2014, is “the new champ” of the midsize sedan segment, according to Edmunds.com. The car “is good at nearly everything” and gets almost 40 miles per gallon in a mix of city and highway driving.

The company is also making the right good cars. Crossovers—baby SUVs—are the hottest sellers in the U.S. car business at the moment, and Nissan’s new Rogue is excelling. It can be had with a third row of seats for the first time, but it’s only slightly longer than its previous iteration. Dealers began selling it in November, and they have sold 124,500 Rogues in the past eight months, a 17 percent increase over the year-earlier period. Road & Track said the overhaul moved the Rogue to the front of the crossover class, with Honda’s CR-V and Toyota’s RAV4.

With the products in place, Nissan also tuned its pricing. Specifically, it lowered prices a bit while snatching away some of the generous incentives it has long used to lure buyers. “Our plan for fiscal year 2014 is to continue to try to take as much price as possible,” Carlos Ghosn, Nissan’s chief executive, said on a recent conference call.

The company also scrapped its so-called stair-step program, a controversial incentive structure that sometimes rewards dealers who slash prices at the end of the month to hit volume targets.

The financial engineering is paying off. For the 12 months that ended in June, the average sticker price of a Nissan in the U.S. dropped from $29,110 to $28,599, a decline of almost 2 percent. At the same time, the average cash incentive dropped from $2,692 per vehicle to $1,794. Crunch the two, and one finds almost $400 in additional margin per car.

As a result, Nissan’s incentives are finally in line with those of its rivals.

Not surprisingly, Nissan said this morning that profit in the recent quarter surged 37 percent, to 112.1 billion yen ($1.1 billion), a far better result than analysts expected.

Kyle-stock-190
Stock is an associate editor for Businessweek.com. Twitter: @kylestock

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