Autos

China and U.S. Boost Nissan

The most important statement from Nissan’s report on earnings for the period ending June 30:

The improvement reflected particularly strong unit sales growth in the key markets of the U.S. and China, up 14.1% and 21.1% respectively.

The improvement drove Nissan’s revenue up 10.4% to $24.1 billion and net income higher by 36.7% to $1.1 billion. The net income figure is hard to compare to that of any other global car manufacturer. The increase is just that good.

The surge should be expected in China, but not as much in the United States. China has become the world’s largest car market, and the penetration of car ownership is less than 100 vehicles per 1,000 people, despite 2013 sales of more than 20 million cars and light trucks, according to CBS News.

The U.S. market does not have the growth prospects that China has, not even close. According to The World Bank, car ownership per 1,000 people in America is nearly 800. Considering the number of people who cannot or will not drive, that is nearly complete saturation.

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The key to Nissan’s recent success in the United States is that it has taken market share from rivals. Nissan’s sales rose 12.8% in the first six months of 2014 to 704,477. Its market share for the period rose from 8.0% to 8.6%. It has come ever closer to eclipsing the perennial number two Japanese car company in the United States — Honda Motor Co. Ltd. (NYSE: HMC). Honda’s sales dropped 0.8% in the first half of the year to 739,436. Its share of the American market has fallen to 9.1%.

Car companies win markets model by model. In the United States, the key for Nissan has been the Sentra. Its sales rose 41.3% in the first six months to 93,898. The numbers are particularly impressive because the Sentra competes in the crowded low-priced, high-mileage sedan market. It has a base price of $15,900 and gets 40 mph for highway driving. Nissan’s advantage in this portion of the car market, it says, is because the Sentra is priced lower than rivals, which include the Honda Civic, Toyota Motor Corp.’s (NYSE: TM) Corolla and the Hyundai Elantra. Apparently, the Sentra does not compete with any American cars.

Nissan’s sales improvement should continue for the next several quarters, particularly if it can continue to steal sales in the United States.

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