Is Recent Success Sustainable for Japanese Automaker?

Just this week, Nissan Motor Co. announced its quarterly earnings, which revealed that its profits had experienced a 37 percent surge during the first half of the fiscal year. Because of this revenue spike, Nissan's net income through March is now projected to reach $4.44 billion, an unprecedented level in the company's history. Nissan is now experiencing its fastest sales growth in over ten years, citing rising demand in the United States and Western Europe as a significant part of its success. This is an important record for the popular manufacturing company, but it may not last too much longer. 

The success of the car manufacturer contrasts with its home economic situation. Ever since Japanese Prime Minister Shinzo Abe weakened the value of the yen, international profits for Japanese businesses have expanded dramatically. These profits are coming mainly from the Western market; however, domestic sales of cars have not reached large numbers. Surprisingly enough, China, known as the world's biggest market for automotive products, has decreased its demand for cars dramatically over the past decade. This is also the case in other emerging markets, including Russia, Indonesia, and Brazil. Nissan's major business problem was that many of its plants are located in these countries, which caused its sales to suffer. Now that business abroad is booming, it is starting to make up for the profit lost in emerging markets.

The increased demand for Nissan vehicles has led to to similar results for Japan's two other big automotive manufacturers, Toyota Motor Corp. and Honda Motor Co. Just like Nissan, these two companies also saw their sales go up in the U.S., increasing their quarterly profits by significant amounts. In fact, Toyota and Honda may experience bigger success stories, as both companies have often outperformed Nissan in the past. If Honda and Toyota catch up with Nissan, not only will the competition limit Nissan's sales, but it may over-saturate the American and European markets with their cars. When this happens, demand from the Western market will taper and the manufacturers will have to fall back on the emerging markets. However, if the Federal Reserve decides to raise interest rates by the end of the year, it could be damaging to business in all emerging markets. 

If Nissan wants to stay on top, it will have to expand its business opportunities and find other countries with high demand for its cars. Business in the Western market is providing them with unexpected boons, but these benefits may not be available much longer.