Nissan’s stocks experience their biggest drop in twenty years.

Nissan’s shares dropped by 12% on Friday, their largest decline in over twenty years, after quarterly profits fell well below expectations and the company reduced its car sales estimates due to intense competition in China.

Big competition from China

The emergence of rapidly growing Chinese brands, such as BYD, which have launched affordable electric cars designed for young Chinese drivers, has led to a constant loss of market share for foreign rivals in the world’s largest automotive market.

Two billion loss

The 11.6% drop on Friday wiped out $1.8 billion from Nissan’s market value. The day before, Nissan reported an operating profit of 141.6 billion yen ($948 million USD) for the third quarter, which was one fifth less than analysts’ (LSEG) consensus estimate, and reduced its global sales forecast by 150,000 vehicles, bringing it down to 3.55 million for 2024.

Expected losses in the Chinese market

Chief Financial Officer Stephen Ma told reporters that sales forecasts were revised downward due to the automaker’s performance in China, where Nissan’s sales declined by a quarter in the nine months leading up to December 31, and also cited stronger competition in other key markets, including the United States.

Revisiting products

Chinese buyers, especially younger ones, are attracted to technological features like driving aids, automated parking, and voice recognition, which are becoming increasingly common among Chinese automakers but have been slower to be offered by international brands.

A strategy that Japanese automakers could adopt would be to launch models that cater to local tastes, then use the excess capacity of Chinese factories to build models for export.

This text is sourced from Reuters.