Nissan is facing a conundrum – while the automaker is set to release new models and trim options to revamp its product lineup, dealers are grappling with an extensive inventory surplus. According to Cox Automotive, Nissan dealers currently have at least three months’ worth of stock, which is over 30% higher than the national average and more than any other full-line original equipment manufacturer (OEM) selling in the U.S.
To address this issue, Nissan has given dealers permission to advertise prices below the invoice for select vehicles. A dealer memo obtained by AutoNews reveals that storefronts can now promote prices that are up to 10% below invoice for most 2024 models, excluding the Armada, which can be advertised at up to 15% below invoice. This move allows potential buyers to see the potential savings without having to visit a physical showroom.
While this may seem like a win for consumers, dealers are not entirely pleased. Selling below invoice means that dealerships bear the cost of the price cuts, rather than Nissan. Dealers are seeking incentives and rebates from Nissan to offset the financial burden. However, Nissan is hesitant to return to its old strategy of giving away cash incentives to boost sales. The automaker wants to avoid a repeat of the pre-pandemic era when the brand’s reputation suffered due to stale models and excessive reliance on rebates.
Despite these challenges, Nissan ended its 2023 financial year on a positive note, with sales up almost 20%. The company aims to achieve steady growth through a balanced product portfolio and optimal business strategies, as outlined by CEO Makoto Uchida. The U.S. market is expected to play a significant role in Nissan’s profit growth for the 2024 financial year, especially as China-market sales decline.
Dealers who are already selling below invoice are generally content with the increased freedom to advertise their way out of the surplus inventory. They see it as an opportunity to alleviate the financial burden of elevated floorplan insurance costs. However, some dealers have concerns about history repeating itself. In the past, selling below invoice has led to tactics that negatively impact the customer experience, such as dealers pushing upsells to recover their margins. This practice can also intensify competition among dealerships of the same brand, which has previously eroded Nissan dealer profitability and damaged consumer perception.
In conclusion, Nissan’s decision to allow dealers to advertise prices below invoice aims to address the inventory surplus issue by attracting potential buyers with the promise of significant savings. However, this move presents challenges for both dealers and the automaker. Dealers are burdened with bearing the cost of price cuts, while Nissan is cautious about reverting to a strategy that relies heavily on incentives and rebates. It remains to be seen how this new advertising approach will impact sales and whether it will succeed in restoring Nissan’s profitability and brand reputation.
