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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Nissan Motor Co., Ltd.    7201   JP3672400003

NISSAN MOTOR CO., LTD.

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Slumping fleet sales weigh on U.S. auto market

06/30/2020 | 07:23am EST
FILE PHOTO: Unused rental cars fill the Dodger Stadium parking lot as the spread of the coronavirus disease (COVID-19) continues, in Los Angeles

By Nick Carey

Collapsing demand from rental car companies, corporations and government agencies has sapped U.S. auto sales during the coronavirus pandemic and a recovery will likely be slow, threatening auto workers whose jobs depend on fleet sales.

Weak fleet orders are expected to hurt June sales, which automakers will report on Wednesday. Cox Automotive forecasts fleet sales will fall nearly 56% to 1.3 million vehicles after plunging 83% in May and 77% in April.

In the short term, fleet sales are not a major concern for automakers focused on ramping up production to beef up anaemic dealer inventories for higher-profit sales to consumers. They will become a challenge when inventories are replenished, however, since production must be maintained to keep automakers profitable.

Any sustained production cuts could trigger job cuts in an industry that accounts for roughly one fifth of U.S. retail sales.

"If we don't see a rebound in 2021, this will be a problem for automakers," said Zohaib Rahim, economic and industry insights manager at Cox Automotive. "But right now they're using all their production to supply dealers."

Commercial sales are seen coming back in 2021, but government orders may take a hit next year once the pandemic's impact on tax revenue becomes clear.

The rental car industry - where Hertz Global Holdings Inc filed for bankruptcy protection in May - faces a deeply uncertain future. Around 62% of nearly 2.8 million vehicles sold to fleet buyers in 2019 went to rental car companies.

Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, says the car models facing greater risk because of their reliance on lower-margin rental fleet sales include Nissan Motor Co Ltd's Altima and General Motors Co's Chevrolet Malibu.

U.S. fleet sales are dominated by GM, Ford Motor Co, Nissan and Fiat Chrysler Automobiles NV (FCA) and accounted for 16.4% of new vehicle sales in 2019.


https://tmsnrt.rs/2NvNd7D

In 2019, fleet sales accounted for nearly 22% of GM's sales, with about half going to rental fleets and the other half to corporations and government agencies. Fleet sales accounted for nearly 28% of Nissan's 2019 sales, with almost 93% of those sales going to rental car companies.

John Ruppert, Ford's general manager of commercial and government fleet sales, said the impact on commercial sales has been mixed. Ford is the market leader for higher-margin commercial and government fleet sales.

On the positive side, Ruppert said work-from-home policies have boosted orders from telecommunications companies and created new demand for delivery vehicles.

However, after a historic decline in oil prices, Ruppert said it "could be some time in 2021" before industry-wide vehicle orders from oil and gas producers recover.

Contract talks for commercial fleet orders usually begin March or April, but did not this year as the economy shut down.

"We're seeing those contract talks happening now in earnest," Ruppert said. Some orders could be delayed a quarter or two, he said, meaning overall commercial fleet sales should recover some time in 2021.

Ruppert said government orders are based on the previous year's tax base, so 2021 orders will reflect this year's pandemic.

FCA is "bullish" on fleet sales in the second half of 2020 thanks to commercial and government purchases, U.S. head of sales Jeff Kommor said.

"Despite vehicles sitting idle for a few months in 2020, most commercial and government fleet operators have a schedule they adhere to maximize their residual value," he said. 

The Kansas City, Kansas, plant where GM makes the Malibu will be shut down for an extra week this summer, which a spokeswoman said reflected both consumer and fleet demand. GM does not intend to halt Malibu production, she said.

"Rental companies have been an important customer of ours," she added. "We expect that to continue in the future, when the rental market recovers."

The Malibu and Altima sedans have both seen a long decline in consumer demand. Nissan spokeswoman Lloryn Love-Carter said the Japanese automaker "continuously considers a number of opportunities to drive efficiencies within our manufacturing operations."

Nissan declined to comment on fleet sales.

(Reporting by Nick Carey; Editing by Tom Brown)


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
FIAT CHRYSLER AUTOMOBILES N.V. -4.35% 12.57 Delayed Quote.-14.26%
FORD MOTOR COMPANY -3.34% 9.83 Delayed Quote.11.83%
GENERAL MOTORS COMPANY -3.03% 49.97 Delayed Quote.20.00%
HERTZ GLOBAL HOLDINGS, INC. -2.33% 1.26 Delayed Quote.-1.56%
LONDON BRENT OIL -2.91% 54.8 Delayed Quote.9.17%
NISSAN MOTOR CO., LTD. -1.13% 532.7 End-of-day quote.-4.87%
WTI -3.09% 52.11 Delayed Quote.11.60%
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Financials
Sales 2021 7 774 B 74 816 M 74 816 M
Net income 2021 -477 899 M -4 599 M -4 599 M
Net Debt 2021 6 232 B 59 977 M 59 977 M
P/E ratio 2021 -4,37x
Yield 2021 -
Capitalization 2 084 B 20 082 M 20 061 M
EV / Sales 2021 1,07x
EV / Sales 2022 0,94x
Nbr of Employees 136 134
Free-Float 45,6%
Chart NISSAN MOTOR CO., LTD.
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Nissan Motor Co., Ltd. Technical Analysis Chart | 7201 | JP3672400003 | MarketScreener
Technical analysis trends NISSAN MOTOR CO., LTD.
Short TermMid-TermLong Term
TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 20
Average target price 565,89 JPY
Last Close Price 532,70 JPY
Spread / Highest target 178%
Spread / Average Target 6,23%
Spread / Lowest Target -38,1%
EPS Revisions
Managers and Directors
NameTitle
Makoto Uchida Executive President & Chief Executive Officer
Yasushi Kimura Chairman
Ashwani Gupta COO & Representative Executive Officer
Stephen Ma Chief Financial Officer & Executive Officer
Anthony Thomas Chief Information Officer
Sector and Competitors
1st jan.Capitalization (M$)
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