In the ongoing saga of Nissan’s death wobble comes still more disturbing news. As you may or may not know Nissan is tanking. Profits have plunged and dealers are having problems staying afloat with vehicles in competitive markets like mid- and full-size pickups. In those segments, the average model age is 20 years old. Now comes word that Nissan dealers would rather sell used vehicles than new ones. We’ll give you one reason why.
Yep, it’s about profit. Last year Nissan instituted what it called its “stair-step” program. It is a factory incentive program. When Nissan decided to tweak some of the bonus money for dealers that hit certain volume targets the dealers got mad. They say there is no profit in selling certain new Nissan models without the bonus.
Nissan dealers can’t make any profit selling new Nissans
Now, with so many dealers backing out of an incentive program that began with only 50% participating, Nissan is having trouble honoring the controversial program. “It’s very difficult for the majority of dealers to hit current stair-step targets with the money in the system, and be profitable,” said Nissan National Dealer Advisory Board Chairman Scott Smith to Automotive News.
Smith says that over 40% of all Nissan dealers are losing money or barely breaking even. To combat the poor sales and lack of margins in Nissan products dealers are instead looking to used cars. Higher-margin certified pre-owned and used sales are more profitable according to Smith.
When it comes to selling new Nissans, “It’s like somebody shut the faucet off.”
Dealers are becoming more vocal about the dated model’s potential customers are walking away from. According to David Basha, owner of Carriage Nissan in Gainesville, Georgia, “You don’t have as many customers. It’s like somebody shut the faucet off.”
Without dealers in the program pool, it means they aren’t ordering nearly as many new Nissans. That means reduced volumes for Nissan plus fewer vehicles for dealers to service. It’s all a vicious cycle of not-good.
Basha says he’s gone from stocking over 400 new Nissans to around 100 in any given month. But he admits it’s not tenable. “We derive our new-customer base from selling new cars, not used,” he said. But without new car customers, there’s no warranty work.
The Nissan portfolio will be refreshed by 70% in 2020 but is it too little too late?
Nissan company spokesperson Chris Keefe told Automotive News, “Our new vehicles will attract more new customers. Nissan is launching 10 new vehicles over 20 months to refresh the Nissan portfolio by 70%. Yes, we know this is true but is it way too little too late?
In Nissan’s defense, he says that in 2020 there is an all-new Versa, Sentra, and refreshed Titan full-size pickup. But two of those three are for sedans which aren’t popular anymore. In two years Nissan US market share has dropped by 1.2 %. It now occupies 7.2 % of the market.
Many dealers have felt that incentives lead to price wars, pitting dealers against each other. Nissan responded by offering cash and other incentives to its dealers without monthly sales goals. But, along with that shift, Nissan also cut back on monthly bonuses. Some were reduced by $1,200 per vehicle decimating dealer profits.
Without the lowest price advertised Nissan dealers just aren’t seeing traffic
Dealers are only allowed to advertise the list price minus consumer rebates. It can’t reveal any dealer discounts until the customer is actually in the dealership. But, advertised prices are what brings customers into the dealer so without the lowest possible price shown dealers aren’t seeing a lot of traffic.
“In the consumer’s mind Nissan is still a B player-it’s not a Toyota or a Honda,” says Smith. “We’re lucky if we hit 40 cars a month now,” says Basha. “In our market area, no one’s coming close to their new-car numbers. They are having to sell used cars to make money.”
It’s no longer about sales objectives for new car and truck sales. It’s about making money on each car it sells. If there’s more money to be made on used vehicles, then that’s what gets sold.