I like to picture Carlos Ghosn sleeping in that three foot box he was smuggled out of Japan in, like some kind of auto tycoon vampire. And every night before he goes to bed, he curses the Nissan in some sort of indecipherable Latin chant before sinking back into his smuggle box, laughing at Nissan's fate. It looks like that curse may be working, because Nissan's Q2 profits show that the automaker is facing a real problem.
Welcome back to Critical Materials, your daily roundup for all things EV and automotive tech. Today, we're chatting about Nissan's death spiral, the U.S. reaching a tipping point for EVs regardless of the outcome of the presidential election, and Tesla's need to type car sales now more than ever. Let's jump in.
30%: Nissan Lost Almost Every Dollar In Quarterly Profit Convincing Americans To Buy Its Cars
Nissan lost nearly every dollar that it made last quarter. The reason? Well, according to CEO Makoto Uchida, it used the money to help convince U.S. customers to actually buy its cars.
The automaker's profits fell 99% in its first quarter (running from April 1 through June 30), sending its stock plummeting nearly 11% before briefly recovering. In the entire quarter, the automaker profited just $6.5 million versus $835.5 million the year prior.
The U.S. and China typically make up 51% of Nissan's automotive volume. The problem is, Americans aren't buying Nissans like they used to. This has led to the automaker needing to throw piles of cash on the hoods of its cars and significantly uptick its advertising efforts to stay competitive.
Nissan even offered dealers cash to take inventory back in March, sliding as much as $2,000 to retailers willing to take inventory of unsold Nissan Rogues. And, yes, customers noticed, questioning why there were so many "New" 2023 Nissans on the lot when 2024 models had already been on sale for some time. On top of the dealer incentives, Nissan also offered 0% financing on some models while prime auto loan interest rates were still sky-high.
From Automotive News:
To limit the decline and bolster demand, Nissan booked overall selling expenses and pricing adjustments of around 77.8 billion yen ($498.5 million), taking a huge bite out of operating income.
Nissan cleared stocks of the 2023 Rogue as the company rolled out the freshened 2024 model of the popular nameplate. The model changeover, Uchida said, was further undermined by a sudden softening of overall U.S. market demand that required more spiffs.
Nissan’s spending over the quarter came mostly in the form of consumer loan assistance, instead of cash on the hood, in an effort to buoy resale values, Uchida said.
“The most important factor here is U.S. inventories,” he said.
To be clear, this includes gas cars and not just Nissan's EVs. But that's the problem.
Another issue (perhaps even the main problem) is the lack of innovative cars in a changing market. Nissan only makes two EVs today: the aging Nissan Leaf and the Nissan Ariya. It also lacks any proper hybrids, technically-advanced features, and other buzz-worthy items in a modern vehicle. Consumers paying top-dollar for a new vehicle want the flashy buttons and knobs, and Nissan simply hasn't been delivering these in recent years.
As traditional automakers like Hyundai, Kia, General Motors and Ford up their tech and electrification games, where is Nissan? Apparently struggling to drive interest in the gas-powered Rogue.
On the EV front, consumers have found that only the Nissan Leaf is eligible for the federal EV tax credit. That's because it's made entirely in Smyrna, Tennessee. The automaker's newest flagship EV, the Ariya, is an export from Japan, making it ineligible for the $7,500 federal tax credit. The only exception is if the car is leased, which Nissan used to its advantage, eventually dropping the electric SUV's lease price to as low as $199 per month thanks to $9,280 in lease cash, $1,000 in bonus cash, and another $1,000 in loyalty cash. All of that comes to $3,780 over the federal tax credit.
Nissan has committed to launching seven new hybrids and EVs in the U.S. by 2028 as part of its business plan titled "The Arc." However, it still needs to convince customers to purchase its cars over the next four years while it prepares a new lineup, and hopes to do that by refreshing 60% of its ICE-powered cars by next year.
"The first quarter was a very tough one for Nissan," said Uchida during an earnings briefing, reaffirming Nissan's commitment to change. "However, we'll recover our performance by taking clear measures to address the challenges and launching new models."
It had better, because at the rate things are moving, 2028 may well be 500 years away.
60%: ChargePoint CEO Says U.S. Is Pushing Forward With EVs Regardless Of Who Becomes President
The forceful push of new EVs in the U.S. is too strong to be stopped, even if former president Donald Trump returns to the White House and makes true on his promise to wipe out current president Joe Biden's EV policies "on day one" as promised.
Rick Wilmer, CEO of EV charging conglomerate ChargePoint, says that he expects EV sales to continue to grow regardless of which candidate takes a seat in the Oval Office after November.
"I think that the overall market forces are a much stronger force than whatever the government can do to accelerate or not accelerate EV adoption," said Wilmer in an interview with Bloomberg last week. "There’s been too much investment made, [and] you hear many auto CEOs—auto OEM CEOs—talk about the fact that we’re past the tipping point."
Wilmer called EVs "the superior product," and expects that consumers will make purchasing choices based off of merit, and the direction of market forces which appear to be too strong to falter at its current pace—which, despite misleading headlines, hasn't stalled.
As for ChargePoint, doesn't directly benefit from the sale of EVs, however, it does exist because of the vehicles.
The company makes up the largest Level 2 charging infrastructure in the U.S. and has nested itself well within the top five largest DC Fast Charging networks as well. Plus, ChargePoint also sells EV charging products to consumers, including Level 2 wall and B2B products. As noted, it also offers Level 3 DC Fast Chargers which can take advantage of funding via the National Electric Vehicle Infrastructure (NEVI) grant program.
Wilmer says that even if Trump wins the presidency and targets both EV and charger installation subsidies, ChargePoint expects its business to be largely unaffected given consumer interest in EVs is now expected to drive significant growth.
90%: Tesla's 2024 Isn't Going So Great. Why Isn't It Hyping Up Auto Sales?
Tesla CEO Elon Musk seems to be bored of cars. The automaker has long lived on the market valuation of being a tech company that builds cars rather than a traditional automaker—that, combined with its head start on the EV market—has led to success with EV adoption and investors. But now that competition is mounding across the industry, Tesla is starting to feel the squeeze of legacy auto shaving off distance in the race to EV supremacy.
In Tesla's latest quarterly earnings call, the automaker talked up all areas of its business except for auto sales. And there's probably a good reason—namely its awful year of sales thus far.
To Tesla's credit, it warned that 2024 wouldn't be a great year for auto sales. The automaker said that its working on many competing priorities, including perfecting the 4680 cell, ramping up the Cybertruck, revealing its autonomous robotaxi product, and launching unsupervised full self-driving by the end of the year (or maybe next year, who knows). That being said, its Q2 figures were pretty awful and rather than press on why consumers should buy its cars, the company instead slammed focused on pushing its AI and robotics products.
"I don't want to get into the details of product announcements," said Musk during the earnings call on Tuesday when questioned about which vehicles Tesla planned to launch in 2025. "And we have to be careful of the Osborne effect here. So if you start announcing some great things, it could affect your near-term sales. We're going to make great products in the future just like we have in the past, end of story."
Currently, Tesla still holds the global crown in EV sales. It added another feather to its cap as the Model Y earned the title of best-selling car in the world for 2023 and served to be the benchmark to just about every other electric crossover debuting on the market. However, Tesla may lose that crown to Chinese automaker BYD in 2024, according to Bloomberg:
Tesla on Tuesday reported its fourth straight quarter of disappointing profits. The carmaker is far off the pace of the 1.8 million cars it sold last year and again warned it expects to see a "notably lower" growth rate in 2024.
[...]
In the longer run, BYD is forecast to hold its sales lead over Tesla through 2027, before the US automaker regains the crown in 2028, while third-placed VW will slowly close the gap with its bigger rivals.
Tesla is still the biggest carmaker globally by market capitalization, with a value of $786 billion at Tuesday’s close—before the shares fell 8% in extended trading. BYD is third at just shy of $100 billion.
Tesla's biggest problem appears to be its aging lineup. The automaker's Model S and X sales have been dwindling due to the platform's age, and its Model Y sales haven't grown due to consumers waiting for the rumored "Juniper" refresh to be released.
Calls for Tesla's cheap $25,000 car to come to market by consumers and investors seem to not be well-received by the CEO. Instead, Tesla has shifted its focus to rapidly solving self-driving and launching its driverless robotaxi product in the near future while the rest of the EV industry is pushing to drive down the introductory costs of EVs for mass market adoption.
It seems that Tesla is out of touch with what consumers want. If Tesla wants to be a tech company that uses cars as a means to an end, that's fine—but then consumers need to shift their expectations of the company based on what investors see as valuable. And those two visions won't always align.
100%: How Tight Is Your Brand Loyalty?
With Nissan's lack of innovation and Tesla's recent politicization turning off customers, it seems that those shopping around for a new car may have some decisions to make: do they stick with a brand they know and trust, or choose another car from a different brand because it better fits their needs or moral compass?
I've owned a myriad of different brands over the years—nine, to be exact. As an auto enthusiast, I tend to choose cars based on their merit rather than sticking with a particular brand. But after owning a Tesla, I can see how familiarity and features keep customers.
So if given the choice, would you stick with a car from the same brand, or choose a vehicle from a completely different brand? Let me know why in the comments.
