As it’s likely the yen will strengthen further folowing the shock downgrade of the US credit rating, a Nissan Motor executive said on Sunday the automaker aims to reduce exports from Japan to soften the negative impact from the stubbornly strong currency.
Nissan, Japan’s second biggest car maker by volume, will boost production for the domestic market to maintain its pledged 1m volume a year, Hiroto Saikawa, a Nissan executive vice president, told Dow Jones.
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The strategy is part of the company’s efforts to meet its targeted operating profit margin of 8% and global market share of 8% set under its business plan for the next six years.
“We’ll maintain a production volume of 1m vehicles in Japan by using (domestic production) as our manufacturing centre to enhance our competitiveness,” Saikawa told reporters at Nissan headquarters in Yokohama.
The targeted ratio of exports to Nissan’s total domestic production will be still short of the industry’s leading level in Japan possibly still leaving the company vulnerable to the yen’s rise.
With the current levels of the yen, Japanese carmakers find it hard to export vehicles profitably from the home country.
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By GlobalDataNissan estimates that each time the dollar weakens by JPY1, the move reduces the company’s annual operating profit by JPYY20bn. The company projects an operating profit of JPY460bn for the current fiscal year ending 31 March, 2012.
Japanese automakers nonetheless seek to keep production in Japan as they believe advanced manufacturing technologies and skills owned by their home factories and suppliers will continue to help them build competitive vehicles.
Tissan is targeting the ratio of production for exports to its overall output in Japan of at least 50% or even 40% in the long term, Saikawa said.
The car maker aims to lower its dependency on exports in Japan as it already decided to move production of the Rogue small SUV to North America from Japan while it also plans to increase production capacity in emerging markets such as China.
This 40%-50% ratio goal marks a steady drop from the 57% in the last fiscal year ended in March but won’t be significantly low when compared to the most recent ratios at local rivals.
In the first six months of 2011, Honda Motor exported only 37% of its vehicles built in Japan and the ratio at Suzuki Motor was 28% while Nissan had 62% and Toyota Motor logged 56%.
Nissan aims to increase production for the domestic market to 600,000 vehicles which will lift the portion for the Japanese market to 60% at the maximum to its overall output volume in Japan. The company built 460,000 vehicles for its home market in the last fiscal year, 43% of its total production in Japan.
New models, including a new compact, electric vehicles and other green cars should help boost sales and therefore increase output for the Japanese market, Saikawa said.
As a first step, the car maker is already working to boost its domestic share to 15% by the end of March 2014 from the 13% in the last fiscal year.
