What is going on with Nissan? In the depths of a reorganization to save themselves from bankruptcy, it is back to doing one of the main things it got in this mess from. That is dealer incentives. It vowed not to go back to retail incentives and dealer bonus programs but guess what? Nissan is back with dealer volume incentives to improve its US market share. It knows dealer incentives hurt the company, but it brings them right back anyway.
Industry parlance calls it “stair-step.” It is the financial reward given to dealers for hitting specific sales volume targets. “In the last five months, dealers went through the addiction recovery process because we haven’t had objectives,” Tyler Slade, operating partner at Tim Dahle Nissan Southtowne in suburban Salt Lake City told Automotive News. “Now we’re right back to our crack cocaine.”
“We want to continue to be reasonable and work with the dealers”
“We want to continue to be reasonable and work with the dealers,” David Kershaw, Nissan Division vice president of sales and regional operations, told Automotive News last week. “A healthy dealer body with healthy profitability is key to our success.” But the dealers are grumbling. “We just barely made last month’s sales goal,” said David Basha, owner of Carriage Nissan near Atlanta. “To me, it looks like the same old game of escalating objectives. We should have gotten a two-to-three-vehicle increase; instead, we got an increase of about 10 vehicles.”
And the reason for the incentives? Nissan wants to avoid the temptation of escalating incentives, which kill vehicle profitability. It wants to go easier on dealers after pushing aggressive sales targets on stores. But the automaker needs to boost its fortunes in America. Nissan Division sales for the first half of 2020 came in at 393,281, a decline of 40% from last year.
Nissan’s stair-step activity set unrealistic sales targets that fostered a culture of discounting, dented resale values, damaged brand reputation, and sank dealer profitability according to many dealers. It was one of the primary tools former Chairman Carlos Ghosn used to grow the U.S. market share between 2011 and 2017. Nissan rewarded dealers for hitting aggressive monthly, quarterly, or year-end sales goals. It did lift Nissan North America to Ghosn’s specific target — a 10% US market share which also included Infiniti, back in March 2017.
Nissan is under extreme pressure to turn around sales in the US
The automaker is under extreme pressure to turn around sales in the US. Its share has dropped to 7.2% in 2019 from 8.4% in 2017. So far in 2020 Nissan’s market share is 5.4%. But, of course, the COVID-19 pandemic has had negative effects on all businesses. But the incentives do show that Nissan has confidence in the recovery from COVID-19. The entire industry is seeing sales increasing as we move through 2020.
“We’re starting to see the market come back for us, [but] it doesn’t mean we are out of the woods,” Kershaw said. “We remain focused on achieving more sustainable results for the company and the dealers. It will take some time, but we are seeing some really positive indicators.”
Dave Wright, dealer principal at Dave Wright Nissan in Hiawatha, Iowa, said he’s down to about a 15-day inventory, making it hard to commit to a sales objective. “The timing is horrible,” said Wright. He received a September factory sales objective that was 33% higher than a month before. “In August, you had Altima and Kicks volume bonuses and I didn’t have one of those vehicles on the ground.” For many of Nissan’s dealers, its return to objectives does not bode well for dealer profitability.