July 26, 2018 / 11:52 AM / a year ago

Nissan profit quarterly drops 29 percent as U.S. sales slump

YOKOHAMA (Reuters) - Nissan Motor Co Ltd (7201.T) posted a 29 percent drop in first-quarter profit on Thursday, slammed by a drop in profitability at home and sluggishness in the United States, where the firm is starting to cut back on steep discounts.

The Nissan logo is seen at the 2017 New York International Auto Show in New York City, U.S. April 12, 2017. REUTERS/Brendan Mcdermid

Operating profit at Japan’s second-biggest automaker by sales volume was 109 billion yen ($986 million) in April-June. Dragging on earnings was a 40 percent plunge at home versus the year prior, when refreshed models such as the Serena minivan and Note compact multipurpose vehicle pushed up sales.

Higher product development costs and fewer vehicles made in Japan for export to North America and Europe also pulled down domestic profit.

In North America - Nissan’s biggest market, accounting for one-quarter of its global sales - profit slipped 2.6 percent, driven by a 9.5 percent fall in U.S. sales volume.

Profitability in the region extended its two-year decline, brought about by heavy discounts on popular models such as the Rogue crossover sport utility vehicle (SUV) as Nissan pursued market share. The carmaker has now changed tack, prioritizing profitability by reducing incentives and slashing inventories.

New model launches, including the Kicks subcompact SUV in June and Altima due later in the year, are likely to limit the sales slide in the second half of the year, Nissan said.

“We’re not expecting a big turnaround in profitability in the second quarter,” Corporate Vice President Joji Tagawa said at a briefing. “But from the second half, new models will improve our position on incentives and enhance profits.”

Nissan forecasts North American sales volume to slide 2.9 percent in the year through March, lagging a 2.7 percent increase worldwide.

Nissan also said sales rose 6.9 percent in China in the first quarter, and fell 0.8 percent in Japan. Global sales fell 3.0 percent.

Tagawa said a possible rise in import tariffs in the United States could have a “significant” impact on the country’s vehicle market, and that Nissan would decide how to adjust operations if and when necessary.

U.S. rivals General Motors Co (GM.N) and Ford Motor Co (F.N) as well as Fiat Chrysler Automobiles NV (FCHA.MI) have flagged lower annual profit due to the impact of tariffs, particularly those for aluminum and steel which have pushed up prices.

Nissan assembles roughly 60 percent of the vehicles it sells in the U.S. at two local manufacturing sites, and also imports vehicles from countries including Mexico, South Korea and Japan.

Reporting by Naomi TajitsuEditing by Christopher Cushing

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