Nissan mulls exiting S. Korea on slow sales amid souring relations with Japan: report

10, Sep. 2019

Nissan Motor Co.’s sales slump all but offset the positive effects of the arrival of its upgraded “Altima” sedan in June. (Photo courtesy of Nissan Motor)
Nissan Motor Co.’s sales slump all but offset the positive effects of the arrival of its upgraded “Altima” sedan in June. (Photo courtesy of Nissan Motor)

SEUOL, NNA - Japanese automaker Nissan Motor Co. is discussing pulling out of the South Korean market where its sales plunged amid a nationwide boycott of Japanese products due to a simmering political and trade raw between the two countries, the Financial Times has reported.

A withdrawal like this may be part of Nissan’s business restructuring strategy covering its global operations, but the plummeting sales amid the worsening of Japan-South Korea relations are also widely seen as one of the reasons for the move.

Citing people familiar with the company’s thinking, the British business daily reported on Friday that Nissan is also reexamining its role in an assembly plant in the southern port city of Busan owned by a local joint venture with Nissan’s French partner Renault SA.

When contacted by NNA, an official at Nissan Korea Co. declined to comment on the report.

Sales (new registrations) of Nissan cars in South Korea plunged 87.4 percent year on year to 58 units in August, according to statistics released last Wednesday by the Korea Automobile Importers & Distributors Association (KAIDA). Separate sales by Nissan’s luxury division “Infiniti” also fell 68.0 percent to 57 units. Amid the wide-spread boycott of Japanese products in South Korea, sales of Japanese cars, in general, plunged 56.9 percent with Nissan being one of the hardest hit.

In the April-June quarter 2019, Nissan’s consolidated operating profit plummeted 99 percent. The company has put forth a plan to curtail its global production capacity by 10 percent and cut the workforce at its 14 bases around the world by over 12,500 by the fiscal year 2022. It may have been accordingly forced to review its South Korean business.

The Tide turned in 2016

Nissan moved into South Korea in 2002, and its compact “Cube” model became a hit after it was put on the market there in 2011, endorsed by idol songstress Lee Hyo-ri and ushering in a compact vehicle boom. Nissan’s mainstay medium-sized sedan for the U.S. market, “Altima,” enjoyed a steady rise in sales in South Korea, where its rival domestic brands differed little in prices, supported by young people who love foreign brands.

This popularity, however, started to slip back after a scandal broke out in 2016 concerning illegal practices in the certification of sports utility vehicle Qashqai and that of Infiniti Q50. In 2017, South Korea’s Ministry of Environment nullified the sales certifications of the two models, resulting in a decline in Nissan’s credibility and sales.

Against this backdrop, the nationwide boycott added insult to injury and all but offset the positive effects of the arrivals of Nissan’s mainstay SUV “X-Trail” and the revamped Altima. Nissan slumped to 10th and Infiniti 20th in the brand-by-brand rankings as of August 2019.

Nissan has been manufacturing its SUV “Rogue,” a popular model in the U.S. market, in South Korea at Renault Samsung Motors, an affiliate of Renault. However, they are discontinuing production at the end of this month. This is in conjunction with Renault Samsung’s streamlining of its business with measures such as soliciting voluntary retirement at its production lines in Busan.

Toyota, Honda seriously affected as well

A withdrawal by Nissan may prompt its Japanese rivals Toyota and Honda to curtail their businesses in South Korea as well. Lexus, Toyota’s high-end division, posted a 7.7 percent year on year increase in sales in August as the only Japanese brand to have registered positive growth in South Korea. This growth can be interpreted as merely a reactionary gain because there was a shortage of stock of popular “ES” luxury sedans a year earlier. Toyota’s sales plunged 59.1 percent in August although it put an upgraded version of hybrid “Prius” on the market in June. Honda also struggled with an 80.9 percent sales drop in August.

Japanese automakers are finding it challenging to put their South Korean business back on the right track with no indication of improvement in the Japan-South Korea relationship.