October 3, 2024 – Tokyo, Japan:- Nissan Motor Co. is facing a financial crisis that could lead to bankruptcy within the next two years, analysts warn. The company, burdened by significant debt rated as “junk,” is grappling with plummeting sales, shrinking profits, and mounting challenges in adapting to the rapidly changing automotive industry.
Nissan’s CEO recently admitted that the company exaggerated sales forecasts and expects profits to be 70% lower than anticipated. Instead of profits, the company reported losses exceeding $61 million in the last quarter alone. In response, Nissan announced plans to cut 10,000 jobs, reduce global production by 20%, and sell its Mitsubishi shares to maintain basic operations.
The automaker’s full-year revenue forecast has been slashed to $83 billion, with expected vehicle sales down to 3.4 million from the originally projected 3.8 million. These setbacks coincide with a looming “bond maturity wall,” making it increasingly difficult for Nissan to secure cash flow. Debt repayments are projected to spike from $1.6 billion in 2024 to $5.6 billion by 2026.
Nissan relies heavily on China, where it traditionally derives 40% of its profits. However, the rapid shift to electric vehicles (EVs) in the Chinese market—now over 56% EV—poses a significant challenge. Nissan’s EV lineup is limited and uncompetitive, exacerbating the financial strain.
Market conditions have worsened as credit agencies continue to downgrade Nissan’s debt. The company’s ratings from Moody’s and Fitch are at the lowest investment grade, while S&P has already classified it as junk. Rising interest rates on its loans further hinder Nissan’s ability to secure funding.
Adding to the uncertainty is the potential for increased tariffs in the U.S., a key market for Nissan. The automaker, which manufactures many of its vehicles in Mexico, could face higher costs if tariffs are imposed, slashing already thin profit margins.
Nissan’s financial health has deteriorated significantly, with a debt-to-earnings ratio of 8, the highest among Japanese automakers. Industry averages are closer to 3.3, highlighting the scale of Nissan’s struggle. The company’s bonds and credit default swaps are reflecting heightened investor concerns, with yields and premiums climbing to multi-year highs.
The future remains uncertain for Nissan. Analysts speculate that acquisition by a larger player, potentially a Chinese conglomerate like BYD, may be the only viable path to survival. Meanwhile, the global shift toward EVs, combined with intensifying market competition, leaves Nissan facing an uphill battle to remain relevant in an industry rapidly leaving it behind.