Nissan expects sales growth to slow in China, U.S. in near term

Nissan Motor Co Ltd on Monday said its sales growth in the world’s two biggest auto markets is likely slow in the near term as consumer tax breaks end in China while U.S. tastes move away from the automaker’s main area of focus.

Japan’s second-biggest automaker by sales, which earlier blamed a strong yen for a 19 percent drop in second-quarter profit, made the comments after growth in Chinese and North American retail vehicle sales outperformed many markets in April-September.

Sales in China in the six-month period grew 3.8 percent from a year prior, and Nissan’s head of operations in the country, Jun Seki, expects double-digit sales growth for calendar 2016, aided by economic incentives aimed at stimulating demand.

“But as the government’s small-car subsidies wind down at the end of the year, we’re expecting to see a slowdown in sales early next year, and see single digit growth for the year,” Seki told reporters at Nissan’s Yokohama headquarters via telephone.

Nissan also said recent growth in China’s auto market was due mainly to rising demand for local brands. In response, the automaker said it would further promote its China-only Venucia brand.

The automaker sells almost a quarter of its output in China, and around 40 percent in North America.

Its North American retail vehicle sales rose 5.4 percent in April-September. But it said demand growth was peaking and that any additional growth had been limited by its dependence on sales of sedans, at a time when low fuel prices had boosted demand for petrol-guzzling sport utility vehicles.

Aggressive buying incentives for its sedans had also crimped profit margins, Nissan said.

The automaker on Monday nevertheless kept its operating profit forecast at 710.0 billion yen ($6.80 billion) for the year through March, down 10.5 percent from a year prior, and said it continues to expect sales of 5.6 million vehicles.

It also said it still expects the domestic currency to average 105 yen to the U.S. dollar and 120 yen to the euro.

Earlier, Nissan said yen strength was responsible for July-September operating profit falling 19 percent to 163.9 billion yen – a result that still beat the 154.5 billion yen average of 10 estimates from analysts surveyed by Thomson Reuters I/B/E/S/. For April-September, profit fell 14 percent.

Nissan raised its exposure to the strong yen at the start of the business year in April as it has been exporting its Rogue SUV crossover model from Japan to North America to meet demand.