With buyers waiting in long lines, Nissan is honoring the law of supply and demand, raising the price of its new Leaf battery-electric vehicle by 7.4 percent for the upcoming 2012 model-year.
At the same time, the maker plans to continue expanding the availability of the Leaf, which it has until now been offering in just seven states. So far, Nissan has delivered just 4,000 of the high-profile battery cars, but it is rapidly ramping up production and could come closer to its original goal of 20,000 Leaf sales for 2011.
That Nissan is able to boost production of Leaf, and most of its other products, is significant considering that its key competitors, Toyota and Honda, are still struggling to cope with the shortages caused by the March 11 Japanese earthquake and tsunami. While those two makers work their way through a variety of issues that have slashed sales and slammed profits, Nissan has been posting sharp gains and setting its sights on even bigger goals: its CEO wants to boost global volume by as much as 50 percent over the next six years.
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With last December’s launch of the Leaf, Nissan has been stealing a march on lead rival Toyota, aiming to position itself as one of the auto industry’s environmental and technology leaders. Though the numbers have so far been modest, Nissan claims that four out of five Leaf buyers have been “conquested” from other brands. What's more, it is providing the Japanese maker a much-needed halo.
“If Nissan can do a product like the Leaf,” suggests Vice President of Product Planning Larry Dominique, “a lot of people are asking what else can we do.”
Quite a bit, he suggests. After several slow years, the maker’s product program has been rapidly ramping up, both for the mainstream Nissan brand and for its up-market sibling, Infiniti. The latter, long an also-ran in the luxury segment, has begun gaining traction in recent years. That's largely based on well-reviewed G-cars, like the G37 coupe, which compete with the BMW 3-Series and Mercedes-Benz C-Class.
Infiniti has three more offerings in the works, near-term, including the compact JX crossover, which will be unveiled in August, and a high-end variant of the Nissan Leaf. The main brand, meanwhile, has a number of new 2012 offerings, Among them is an upgraded version of its small Versa sedan, which has been gaining ground with Americans who want to migrate to smaller, more fuel-efficient models.
Nissan didn’t escape unscathed from the March disaster. It was clobbered in May, posting a U.S. decline of 9.1 percent. But while key Japanese rivals were slammed again in June, Nissan sales surged back, rising 11 percent, year-over-year.
“They did a lot better job” overcoming the shortages, says Aaron Bragman, automotive analyst with the consulting firm IHS. “They’ve been a lot more effective at global sourcing” of parts that would have been in short supply otherwise, he explains.
That’s a key reason why the maker was able to boost production at its four North American assembly plants by 9.1 percent during the first half of 2011, to 565,730. That put it in the lead position among the so-called “transplants.” Toyota’s year-over-year production slipped 28 percent, to 555,972, while Honda’s North American output dropped 20.8 percent, to 516,603.
Last month, Nissan CEO Carlos Ghosn indicated the maker’s U.S. sales should top 1 million in the current fiscal year, a 7.7 percent increase over the prior year, which ended March 31. If anything could deliver a setback, it’s that Nissan’s four U.S. and Mexican plants are pushing up against capacity constraints.
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“What’s clear is if we look at our aspirations for growth in the U.S. and the role the (two Nissan) Mexican plants play for our growth in North and South America we’re going to have to have more capacity,” acknowledges global marketing chief Simon Sproule.
What’s now being debated, inside the company, is whether to add additional factories or expand the existing plants. The maker’s original U.S. facility, in Smyrna, TN, is already undergoing an update to permit it to start producing the Leaf, starting late in 2012.
With less than a third of its global capacity based in the home market, Nissan is the least dependent of the Asian makers on Japanese production. And that trend will continue as it moves ahead with plans to put factories in Brazil, among other places, while also pushing to expand its role in booming China. Nissan has a substantially stronger position there than latecomer Toyota, analysts note.
That has helped Nissan become the second largest of the Japanese makers, last year nudging past Honda. But for Ghosn, who took over Nissan in 1999, when the company seemed doomed to failure, that’s just the beginning.
On the downside, as a result of the Japanese disaster, rising raw materials costs and lopsided exchange rates, Nissan’s net profit is now projected to slip 15.4 percent, to 270 billion yen, or $3.4 billion, down from 319 billion yen in the previous fiscal year, which ended March 31. On the other hand, revenues are expected to climb 7.1 percent to 9.4 trillion yen, while unit volume is forecast to grow 9.9 percent, to 4.6 million.
Longer-term, Ghosn is aiming for significant growth. His new Power 88 six-year plan aims for an 8 percent global market share – its worldwide sales rising to 8 million — and an 8 percent profit margin on sales.
"This is the first time that Nissan is starting a plan on the offensive instead of reconstructing something, or defending something," Ghosn said last month.
It’s an ambitious target. Analysts note that, under Ghosn, Nissan has missed a number of targets over the past decade. But it has still come out ahead. And so, “with a lot of hard work and a bit of luck,” the Power 88 plan is do-able, contends Kurt Sanger, of Deutsche Bank.
While the Leaf will be little more than an asterisk on the corporate charts, the little battery car is nonetheless helping to charge up Nissan’s image and helping lure in the buyers it needs.
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