Nissan keeps its profit target as it cuts its China sales outlook by about a third

Nissan Motor (TSE: 7201) cut its 2026 retail sales outlook for China to between 370,000 and 400,000 vehicles from 580,000 on Wednesday, November 11, while keeping its target of ¥200 billion in operating profit for the fiscal year to March 2027, according to its first-half results presentation.

China shrinks faster than the plan assumed

Nissan's retail sales in China fell 15.0% to 237,000 vehicles in the six months to September from 279,000 a year earlier, the presentation shows, while the overall Chinese market shrank 22% by Nissan's estimate. The company said its volume outlook was revised "primarily to reflect market conditions in China." In China it reports retail sales by calendar year, and from January to September it sold 313,000 vehicles there, 31.5% fewer than the 457,000 of the same period of 2025.

The new range is 31.0% to 36.2% below the previous China outlook and 38.7% to 43.3% below the 653,000 vehicles sold in China in the last fiscal year. Nissan lowered its global retail sales outlook to between 2.97 million and 3.0 million vehicles from 3.15 million, and its production plan to 2.65 million from 2.8 million.

The presentation lists what Nissan has already changed in China: "Adjusted ICE production and dealer inventory," meaning fewer cars with internal combustion engines, a push for a higher share of new-energy vehicles, and exports of the Frontier Pro pickup and the Primera EV from China.

The US and Japan carried the half

Outside China, sales grew. US retail sales rose 5.5% to 469,000 vehicles and sales in Japan rose 6.3% to 197,000, while European sales fell 7.9%, according to the presentation. Global retail sales fell 4.7% to 1.41 million vehicles, the company's results statement said.

Net sales rose 8.8% to ¥6,072.0 billion. Operating income was ¥80.0 billion, an improvement of ¥107.7 billion from an operating loss of ¥27.7 billion a year earlier, which Nissan attributed to favorable exchange rates and cost cuts in the car business, partly offset by higher raw material prices. Its Re:Nissan restructuring plan delivered ¥110 billion of cost savings in the half, the company said.

The bottom line stayed negative. The net loss attributable to shareholders was ¥39.7 billion, compared with a loss of ¥221.9 billion in the same period of 2025.

The cash side of the ledger

Free cash flow in the automobile business was negative ¥492.9 billion in the half, ¥99.9 billion better than a year earlier, the results statement said. Net cash in the automobile business fell by ¥339.2 billion from the end of March to ¥831.2 billion. Unused committed credit lines stood at ¥1,884.9 billion at the end of September, down from ¥2,311.6 billion at the end of March.

Nissan said all its financial targets for the fiscal year are unchanged: operating profit of ¥200 billion, net income of ¥20 billion and net cash in the automobile business above ¥1 trillion at the end of the year. Its forecast now assumes an average of 157 yen per dollar for the year, against 150 yen when the targets were first published in May. The company is scheduled to file its semiannual securities report on November 13.

A cheaper yen, not China, is holding the target up

We think the unchanged profit target says more about the exchange rate and cost cutting than about demand. Nissan now expects far fewer sales in China and somewhat fewer worldwide, yet keeps ¥200 billion of operating profit, while it assumes an exchange rate 7 yen per dollar weaker than in May. Our reading is that the second half depends on the yen staying near that level and on cost savings continuing at the first-half pace.

The opportunity is real in the US and Japan, where sales grew and better prices supported revenue. The threat is cash: the car business burned ¥492.9 billion in six months and its net cash fell by ¥339.2 billion, so reaching more than ¥1 trillion by March would require a sharp turn. We would watch automotive free cash flow in the third quarter more than the sales count, and we would change this view if China sales stabilize inside the new range while cash flow turns positive.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.