The Japanese car manufacturer Nissan is slashing thousands of jobs in a desperate bid to avoid collapse. The news came after a senior official close to the carmaker revealed Nissan had just “12 or 14 months to survive” and was seeking major investment to save the firm from going bust.

Nissan is looking down the barrel of losing a fifth of its manufacturing capacity and is suffering from rapid turnover among its leadership. On Saturday it was reported that Nissan’s Chief Financial Officer would step down, just 17 months after the company’s COO stepped down in June of last year.

Nissan appears to be on the precipice. The carmaker employs more than 130,000 workers, including 6,000 in North East of England, and if it fails to pull back from the brink the consequences could be disastrous. So why is Nissan in difficulty, and can it survive its 12-month prognosis?

Nissan to slash 9,000 jobs

Nissan announced it would let go of 9,000 workers, or seven per cent of its global workforce, in a move which would reduce the carmaker’s global production by a fifth. It came after the firm slashed its operating profit forecasts for 2024 by 70 per cent.

However, Nissan’s Chief Executive, Makoto Uchida, whose own pay packet has been halved in recent weeks, insisted the ‘restructure’ would make the firm more resilient. Commenting on the job losses Mr Uchida said:

“These turnaround measures do not imply that the company is shrinking…Nissan will restructure its business to become leaner and more resilient.”

But that brave face is belied by Nissan’s balance books, which show the company made a loss of £45 million in Q3. Nissan has yet to reveal where the job cuts will land, although insiders at the UK’s Sunderland plant have indicated they do not anticipate British workers will be impacted by the cuts, Guardian Business reported.

Why is Nissan in trouble?

News of the ongoing crisis at Nissan may have as a surprise to many Brits, where the carmaker continues to achieve success. In 2022 the British-built Qashqai topped the UK sales charts, an achievement which was hailed as a ‘landmark moment’ by the Managing Director of Nissan GB. But while Nissan cars remain a common sight on British roads, half of the company’s global volume relies on the Chinese and US markets, which are where it is suffering most acutely.

From July through to September Nissan sales slumped 14.3 per cent in China and almost 3 per cent in the US. In the first half of the financial year, Nissan’s global sales have fallen 3.8 per cent. Nissan bosses say they failed to anticipate the popularity of hybrid vehicles. Nissan’s head of manufacturing told reporters that:

“This has been a lesson learned and we have not been able to keep up with the times. We weren’t able to foresee that hybrid electric vehicles and plug-in hybrids would be so popular.”

Nissan has also been hurt after Renault reduced its shareholding in Nissan from 43 per cent to just 15 per cent. The French carmaker had been in an ‘alliance’ with Nissan, wherein each company had a stake in the other. However, that relationship had become increasingly fraught, with Renault now reported to be considering dumping its remaining shares in Nissan. A likely candidate to buy Renault’s remaining shares is another Japanese carmaker, Honda. As WardsAuto reported:

“Honda does not hold an equity stake in Nissan, but Honda CEO Toshihiro Mibe says it is a possibility. The Honda-Nissan alliance is focused on collaborating in areas like vehicle electrification, software-defined vehicles and next-generation technology development.

“The partnership aims to accelerate the transition to carbon neutrality and improve safety through shared R&D, software integration, and electric vehicle components. Both companies will leverage their expertise in different fields to co-develop platforms and reduce costs.

“Honda and Nissan are also exploring potential joint ventures in battery technology and autonomous driving systems while maintaining their separate corporate identities and product lines. In short, all the stuff Nissan wanted from the Renault alliance it can now do with Honda.”

Tough times for the automotive sector

The global car-making industry is facing significant challenges due to economic pressures, the transition to EVs, and intense international competition. Firms are suffering from a slower-than-expected uptake of EVs, rising energy costs, and the disruptive presence of subsidized Chinese EV manufacturers in global markets.

EV Adoption Challenges

Although EV sales are growing, uptake varies significantly across regions. In markets such as the U.S. and Europe, adoption is hampered by high upfront costs, limited charging infrastructure, and consumer hesitancy.

High Energy Costs and Production Challenges

The automotive industry’s heavy reliance on energy-intensive production processes has been exacerbated by rising energy prices, particularly in Europe. These costs increase the expense of manufacturing both traditional internal combustion engine vehicles and EVs, compressing profit margins. Nissan, like many competitors, has faced challenges in maintaining competitive pricing while grappling with these rising operational costs.

Impact of Chinese EV Manufacturers

Chinese automakers have emerged as formidable competitors due to government policies fostering EV development, including subsidies totalling over $200 billion. Companies like BYD and Nio have leveraged these advantages to dominate both domestic and international markets. Their success is rooted in aggressive pricing strategies, advanced battery technologies, and vertically integrated supply chains. Chinese EV exports, which grew to 4.4 million vehicles in 2023, have disrupted global markets, leading the European Commission to launch investigations into alleged unfair trade practices.

The challenge for Nissan

While Nissan is holding its own in the UK market, it is falling behind in its larger markets. The automaker failed to anticipate the popularity of hybrid vehicles, which it blames for a slump in the USA and is being squeezed by cheap government-backed EVs in China. As a result, the carmaker is haemorrhaging cash – made worse by Renault offloading most of its shares in the company. Observers think there is a place for optimism over a potential intervention by Honda, who are believed to be considering buying Renault’s remaining shares in Nissan. Whether this potential partnership carves a way through the crisis for Nissan – or whether the carmaker becomes further embroiled in crisis – remains to be seen.