Nissan slashes its net income forecast by 20%

Nissan Motor Co., which is the largest Japanese seller of vehicles in China, has slashed its net income forecast by 20 per cent owing to the sudden dip in its sales in its largest market, owing to a territorial dispute between the two countries.

The many year old territorial dispute once again hit the headlines after Japan's nationalism of an East China Sea island that is also claimed by China. It resulted in huge demonstrations throughout China and a boycott of Japanese products by the consumers. Over fears of being targeted by the angry mobs, Japanese factories and businesses in China remain closed or their operations have been scaled back, which so far has resulted in huge losses.

In a statement released by the Nissan, it said that the net income may total 320 billion yen ($4 billion) for the financial year ending March 31, as against an earlier estimate of 400 billion yen. The Yokohama, Japan based car maker also reduced its operating income forecast from 700 billion to 575 billion yen.

This cutback at Nissan comes after Honda Motor Co. made a forecast of dip in its profits. This forecasts stands testimony to the fact that, how the row over an uninhabited island claimed by both the countries hit the auto industry. Toyota Motor Corp., which is the smallest among the three largest Japanese auto makers, on the other hand, increased its income forecast owing to a strong demand in the US and in Japan.

Nissan’s chief operating officer Toshiyuki Shiga at a press conference on November 6, 2012 said, “The number of visitors to dealerships in China is recovering gradually...and we are making our utmost efforts to normalise the business as quickly and swiftly as possible.”

He further added, “It is too early to think about changing our strategy for China.” Nissan’s Chief Executive Carlos Ghosn, on the other hand, has warned that the company would think many times before planning to make new investments in China. Nissan has many production plants in China and also has plans to open a new factory in 2014 in the north-eastern city of Dalian.

Nissan's profit in the first half of the financial year dropped by 2.8 per cent to 178.3 billion yen. “After factoring in the projected negative impact of a strong yen, disruption in China and continuing weak market conditions in Europe, Nissan has revised downward its full-year forecast,” Nissan said in a statement.