TOKYO -- The burgeoning electric car market in China presents Nissan Motor with an opportunity to turn around its slumping earnings, but the automaker faces a sector crowded with established rivals and local startups.
The stakes could not be higher for Nissan, which is scrambling to find a way to win that race and reach its long-term earnings targets.
The Japanese automaker said Monday that operating profit is projected to drop 6% this fiscal year, falling for a third straight year. While briefing reporters on last fiscal year's earnings, CEO Hiroto Saikawa waded into difficult topics such as the slowdown in the U.S. market and the possibility of adjusting its equity position in French partner Renault.
But the Chinese market was one area where he could be upbeat. "The electric vehicle sales of our Chinese joint ventures tripled to 23,000 units," he said. Nissan's operating profit in China grew about 20% last fiscal year to around 170 billion yen, approaching North America's roughly 200 billion yen in profit.
"We will double electric vehicle sales in China," Saikawa said. The company will up the ante in China this fiscal year by rolling out the locally produced Sylphy Zero Emission electric car designed especially for the market. It will also bring over the new version of the Leaf electric car that is already available in Japan.
With incentives and other spending limited in China compared with such markets as North America, Nissan expects a sizable earnings contribution from the country. Rising sales in the luxury segment are also likely to boost earnings.
Nissan set an ambitious sales target of 2.6 million units for China in 2022. That is a jump of more than 60% from fiscal 2017. The company plans to offer more than 20 models. China would come to account for roughly 30% of its global sales by volume.
China is already the world's largest electric vehicle market, and is projected to grow 10-fold from 2017 to 7 million units in 2025. China could become the Yokohama-based carmaker's biggest overseas earnings base.
Yet investors have been mostly dismissive of Nissan's strides in China, considering the many other headwinds it faces, such as a stronger Japanese yen. Furthermore, the re-examination of the North American Free Trade Agreement casts a shadow over Nissan's production and sales in that critical region. Nissan's stock has been top heavy this year, hovering in the 1,100 yen range.
And there is no guarantee that China will provide the profit boost Nissan needs, given the bevy of rivals all vying for a slice of the market. The Beijing Motor Show last month drew global auto leaders like Volkswagen and Toyota, as well as big local players like BAIC Motor -- all showcasing their latest electric offerings.
"In China's big cities, we see electric cars with a brand logo we haven't seen in other countries," an executive at a major automaker said.
Young Chinese are apparently drawn to low-price electrics made by homegrown startups. The market is expected to get even more crowded as government deregulation lowers the bar for foreign ownership and newcomers enter.