Japan’s automotive industry into the spotlight, Nissan Motor Co. finds itself battling significant challenges as a recent, steep decline in performance has attracted the attention of prominent activist investor Effissimo Capital Management Pte. The Singapore-based hedge fund, known for aggressively engaging in Japan’s corporate sector, has recently taken a stake in the embattled automaker. This development has added another layer of complexity to CEO Makoto Uchida’s efforts to revitalize the brand amid shrinking sales, outdated vehicle models, and aggressive competition.
Uchida’s grand plan for Nissan hinges on introducing 27 new electrified models by 2030. Yet, analysts question whether these ambitions are achievable or if Uchida will be pressured by Effissimo and other shareholders to take more drastic measures to revive the once-dominant automaker. Nissan’s struggle has drawn comparisons to the transformative measures taken by former Chairman Carlos Ghosn, who spearheaded Nissan’s recovery in the early 2000s after Renault bailed out the company.
The financial state of Nissan paints a grim picture. Just last week, the automaker slashed its operating income guidance by 70% to ¥150 billion (approximately $970 million) for the fiscal year ending in March. Nissan’s stock price had been in a steady decline until news of Effissimo’s stake drove a brief rally, raising the share price by 1.6% on Wednesday following a 13% spike the day prior. This unexpected support from Effissimo, though potentially short-lived, underscores Nissan’s precarious position.
Nissan’s troubles are deeply rooted in the brand’s outdated model lineup, especially in key markets like North America and China, where it has failed to keep pace with competitors. The lack of recent updates and innovation—particularly in hybrid and electric vehicle (EV) technology—has led to a slide in sales. Rivals such as Toyota Motor Corp. and Honda Motor Co. have revitalized their product lines in recent years, while Nissan’s last major North American release was in 2021, with the Pathfinder and Frontier.
According to James Hong, an analyst at Macquarie Securities Korea, Nissan’s delayed response to the surging demand for hybrids has proven costly. “It’s clearly a misjudgment by management,” he stated, highlighting Nissan’s failure to introduce gas-electric models in North America, where hybrids are increasingly popular among consumers looking to reduce their environmental impact without committing to full EVs.
Nissan’s Missteps in China
Historically, Nissan was once a strong performer in China, one of the world’s largest and most lucrative automotive markets. However, over the past year, Nissan’s sales in the region dropped by 14.3% between April and September, primarily due to fierce competition and a highly aggressive pricing war among local manufacturers. In June, Nissan decided to cease production at its Changzhou plant, a move indicative of its shrinking footprint in the Chinese market. Once considered a market leader in China, Nissan now faces an uphill battle to regain its position amidst a new wave of domestic electric car manufacturers that are capturing the interest of Chinese consumers.
Julie Boote, an analyst at Pelham Smithers Associates, expressed skepticism about Nissan’s ability to quickly rectify its longstanding issues, pointing out the absence of a net profit forecast in the company’s first-half results, which “implies Nissan is expecting some large, extraordinary losses related to the restructuring efforts.” This ambiguity has added to the general sense of concern surrounding the automaker’s ability to execute its recovery strategy.
Makoto Uchida, who assumed the role of CEO in 2019, has remained committed to Nissan’s shift toward electrification as part of a long-term strategy to stabilize the company. His plan includes the launch of 27 new electrified vehicles by 2030, with hopes of reversing the brand’s declining market share in North America and Europe. However, the timeline and scale of this electrification strategy have led to questions about its feasibility given the company’s current financial constraints.
Despite Uchida’s ambitious goals, Nissan’s structural issues require immediate attention. Over the past few years, Uchida has implemented a round of cost-cutting measures, including a reduction of 9,000 jobs globally and a planned 20% cut to manufacturing capacity. This overhaul was coupled with Uchida’s own symbolic forfeiture of half his salary last week, demonstrating his personal commitment to the company’s revival. Yet the extent of these cost-cutting measures has raised questions regarding the depth of the restructuring needed to truly turn Nissan around.
Effissimo’s entrance as an investor brings a new dynamic to Nissan’s path forward. Known for its ability to shake up struggling Japanese companies, Effissimo previously led a high-profile battle with Toshiba Corp. over issues of governance and shareholder rights. The standoff eventually led to Toshiba’s CEO stepping down in 2021 and, later, the acceptance of a buyout offer. This track record has led industry experts to speculate on whether Effissimo will adopt a similar approach with Nissan.
While Effissimo’s stake in Nissan is notable, its role in the automaker’s governance remains uncertain. Some analysts, including John Seagrim of CLSA in London, believe that Effissimo will initially focus on improving governance and addressing issues with Nissan Shatai Co., a Nissan subsidiary of which Effissimo already holds a 30% stake. Nissan itself owns 50% of the subsidiary, and Effissimo’s influence over Shatai may indirectly affect Nissan’s broader strategy, especially if governance concerns arise.
However, as Seagrim notes, Effissimo’s intentions regarding Nissan itself remain unclear. The hedge fund’s reputation as a catalyst for change suggests it may push for significant reforms, possibly even a reshuffling of Nissan’s board or management if Uchida’s plans fail to yield visible results soon.
Nissan’s Current Challenges
Nissan’s plight has prompted comparisons to the turbulent period in the late 1990s when Carlos Ghosn, after Renault’s bailout, implemented radical changes that revitalized the company and delivered its largest-ever profits. Ghosn achieved this turnaround by slashing inefficient suppliers, streamlining operations, and unveiling new models that quickly resonated with consumers.
Amir Anvarzadeh, a Japan equity strategist at Asymmetric Advisors, remarked that while Uchida faces challenges similar to those Ghosn encountered, the current situation is far more complex. “It really could be all over,” Anvarzadeh commented, adding that the “easy options” of the 90s are no longer available. Today’s auto industry is defined by high expectations for technological innovation, extensive investment in electrification, and increasingly intense competition in the EV space.
North America is one of Nissan’s most significant markets, but the company has struggled to adapt to changing consumer preferences for hybrids and EVs. Nissan’s limited presence in this space has been a strategic misstep, with competitors like Tesla Inc. and China’s BYD Co. expanding their dominance in the global EV market. Nissan’s lack of hybrid offerings, coupled with a dwindling EV lineup, has severely hindered its appeal among environmentally conscious consumers.
Nissan plans to release a new hybrid model in North America by fiscal year 2025, including a plug-in hybrid version of its popular Rogue SUV. However, the delay in releasing these models has left Nissan without options for American buyers eager to transition to hybrid technology.
Koji Endo, head of equities and managing director at SBI Securities Co., noted that developing software and other essential vehicle components could take years to generate results. Until then, Nissan’s primary objective should be to “stop the bleeding” by stabilizing its sales and strengthening its brand appeal.
Drastic Change or Gradual Recovery?
Nissan’s predicament is one of the most challenging the company has faced in recent memory, with many stakeholders questioning whether Uchida’s electrification plan is sufficient to halt the automaker’s decline. As the company’s operating income continues to suffer, the lack of new models and the absence of immediate plans for expanding Nissan’s EV and hybrid offerings suggest a prolonged recovery period.
Effissimo’s involvement could be a double-edged sword for Nissan: the fund’s reputation for corporate activism may pressure Uchida to accelerate Nissan’s turnaround, potentially at the expense of his long-term electrification goals. On the other hand, Effissimo’s financial support and influence could empower Uchida to make the structural changes necessary for sustained growth, provided he can navigate the complex dynamics of corporate governance and shareholder expectations.
For now, investors, employees, and customers alike are left wondering about the future of Nissan, one of Japan’s most storied automotive brands. As the automaker grapples with internal challenges and external pressures, its path forward remains unclear. However, with Effissimo’s backing and the looming potential for substantial reform, the coming months could prove pivotal in determining whether Nissan can secure its place in the rapidly evolving automotive landscape or if it will continue its descent.
