After a brutal six months, Nissan is edging towards a financial precipice of the type that prompted its 1999 rescue by Renault.

The Japanese firm is reportedly scouting for an investment partner to bolster it financially. 

Honda has been named by a source speaking to the Financial Times as a possible buyer for shares being sold by Renault.

Nissan has hit the financial skids during a six months in which it was forced to offer substantial discounts to move metal in its key markets of the US and China. Meanwhile, Europe was its biggest loss-making region in the six months to the end of September.

Operating profit slumped by 90% in the first half of the company’s financial year, which runs from March to April. Operating margin stood at just 0.5%, meaning it was teetering on a loss for the first time since the Covid crisis in 2020.

Nissan's “significant challenges” has forced it to revise its Arc mid-term plan, which was announced as recently as March. That called for an increase in annual sales of a million by 2026, but that’s now unachievable, CEO Makoto Uchida told analysts and journalists at the company’s earnings conference on 8 November.

Some of the 30 new vehicles promised by 2026 could now be delayed, he added.

“As of today, a one-million-unit sales increase will be a tough objective,” Uchida said.

Instead, Nissan is amending its forecasts to around 3.4 million cars, with 3.5m the target for 2026. That compares with 5.4m for the 2015 financial year at the height of then-CEO Carlos Ghosn’s big volume push before he was dramatically ousted two years later.

Tougher competition amid reduced consumer purchasing power has forced Nissan to adjust to lower volumes, prompting the need to shrink its production footprint by 20%.

The company won’t shut plants but will cut 9000 jobs globally as it reduces output on its 25 production lines worldwide, Uchida said. The CEO himself will forfeit half his pay, and the company has paused dividend payments.

Meanwhile, the company’s chief financial officer, Stephen Ma, is reportedly heading for the exit.

Nissan’s most pressing concern is the US, its largest market, with 448,789 vehicles sold in the six months to the end of September.

“Our core models are not selling as much as we expected, nor are they generating the profit that we expected,” Uchida said.

Nissan currently lacks hybrids and plug-in hybrids in the US, cutting it off from a booming market in electrified cars there.

If that wasn’t bad enough, Nissan is also badly exposed to the potential 25% hike in tariffs on Mexican exports that US president-elect Donald Trump announced this week.

Nissan will ship around 300,000 mainly lower-cost cars from Mexico to the US this year, including the new Kicks small SUV and Sentra saloon.

China is another pain point as local players muscle onto turf once dominated by the likes of Nissan.

“The joint-venture non-premium market, a main battlefield for brands including Nissan, is shrinking,” Uchida said. 

Worse, the Chinese are rapidly increasing exports into markets where Nissan also has a commanding share, including the Middle East, Latin America and South-East Asia.

Europe is a smaller market for Nissan than crucial battlegrounds such as the US, China and Japan, with just under 160,000 cars sold in the six-month period. However, the region’s persistent lack of profitability is a worry for the brand.

Nissan lost the equivalent of £202.6m over the six months in the region, continuing a depressing streak of losses. Since 2015, it has posted an annual profit only once for the region, back in 2017.

The UK plays an outsize role in Nissan’s European operations, both in terms of hosting its sole European production plant (in Sunderland) and in sales, accounting for just under a third of the company’s regional total in the six-month period, at 51,141.

The next biggest market is Italy, at 15,946.

Nissan’s weakness in the rest of Europe is a worry as the region moves into the EV era. The company has been sharply critical of the UK’s zero-emission vehicle (ZEV) mandate requiring increased sales of EVs as it lags competitors in the electric space.

Nissan has committed new investment in Sunderland to build the new Leaf SUV as well electric versions of the Qashqai and Juke, but no dates have been announced, and news that the company will be delaying some of its new models under the Arc plan puts another question mark over the plant after years of threats of closure over the Brexit negotiation debacle.

Production at Sunderland regularly broached 500,000 cars annually in the last decade but slumped to around half that in the 2022 financial year, at 260,532.

That gloom looked to have been dispelled last year, when the number of cars built rose dramatically to 325,458, but production has fallen 7.5% in the past six months, with numbers suggesting the final year’s tally could drop below 300,000 again.

Is this a repeat of 1999? Then Nissan was saddled with debt and Renault offered a lifeline. Rising star Ghosn was put in charge and returned the company to profit after cutting around 14% of the workforce and shutting plants. Nissan’s cash situation is better now, but many of the same problems Ghosn had to tackle are back, namely profit-shredding discounting, lack of brand power and overcapacity.

The tie-up with Renault ultimately failed due to in-fighting and the lack of perceived balance in the relationship, due to the skewed shareholding, in which Renault owned a 43% stake against Nissan’s 15% share of Renault. Renault is now selling 5% of its stake, potentially to an outside investor that may or may not be Honda.

Earlier this year, Nissan and Honda announced a collaboration on EVs, including development of electric drivetrains and platforms.

“We need to strengthen our competitiveness. There are limits if we are to do that alone, so that had triggered us to engage in partnership with Honda in a multifaceted manner,” Uchida said on the earnings conference.

Nissan announced in November that it was selling a 10% stake in Mitsubishi, reducing its 34% share in the company, but Uchida said partnerships with both Mitsubishi and Renault would continue as it looked to compete more frugally globally. 

During a very frank presentation, Uchida also outlined the positives ahead, including the roll-out of the successful e-Power hybrid drivetrain as well as plug-in hybrids in the US.

New EVs in China developed with Chinese partner firm Dongfeng are coming to counter the challenge from local brands. Development time for new cars will be cut to 30 months to bring fresher models, Uchida said. 

What Nissan needs now is a repeat of the same do-or-die innovation in the 2000s that ultimately created the Qashqai success story.