Nissan on Tuesday slashed its full-year profit forecast by 20 per cent as it pointed to the effect of a strong yen, weakness in Europe and slumping sales in China over a bitter territorial row.
Japan’s second-biggest carmaker now tips net profit for the year to March of 320 billion yen (HK$31 billion), down from its earlier estimate of 400 billion yen.
It also said first-half profit slipped 2.8 per cent to 178.3 billion yen on sales of 4.54 trillion yen, which were up 4.1 per cent.
“After factoring in the projected negative impact of a strong yen, disruption in China and continuing weak market conditions in Europe, Nissan revised downward its full-year forecast,” the company said in a statement.
The company also cut its full-year sales forecast for China by 13 per cent as the diplomatic spat between Tokyo and Beijing sparked a Chinese consumer boycott of Japanese goods.
Nissan, part-owned by France’s Renault, said it now expected to sell about 1.18 million vehicles in China, the world’s largest vehicle market, in the year to March, down from a previous forecast of 1.35 million.
Japan’s carmakers have seen a steep drop in sales in China in recent weeks, with Honda blaming the ongoing row for a 20 per cent cut to its annual profit forecast.
The row stems from Tokyo’s nationalisation in mid-September of an East China Sea island chain – known as the Senkakus in Japan and the Diaoyu Islands in China – that is also claimed by Beijing.
Protests over Japan’s claim to the islands led to violent protests on the mainland and a widespread boycott of Japanese companies and goods.
“The China factor is still unpredictable as this is politics, not business,” Shigeru Matsumura, auto analyst at SMBC Friend Securities in Tokyo said. “Foreign exchange risks will also remain a key factor with a considerable impact on [carmakers’] earnings.”
Toyota, less dependent on the China market than Nissan and Honda, on Monday warned it would sell about 200,000 fewer vehicles in China in the second half of its fiscal year and take a 30 billion yen hit to the bottom line.
“The number of visitors to dealerships in China is recovering gradually...and we are making our utmost efforts to normalise the business as quickly and swiftly as possible,” Nissan’s chief operating officer Toshiyuki Shiga told a press briefing on Tuesday. “It is too early to think about changing our strategy for China,” he added.
But Nissan’s chief executive Carlos Ghosn warned that Nissan would think twice about making new investments in China amid the row. It has several production plants in China with a new factory in the northeastern city of Dalian planned for 2014.