Nissan Motor has been riding bumpy over the last few months.
In February, it reported a sharp decline in profits, cutting its third outlook in the face of a decline in sales in the past 12 months. Merger talks with Honda have collapsed, and the company is rushing to cut costs and cut thousands of jobs.
Now it's blessed with something that could be another shock to the business. It is a tariff that President Trump threatens to impose on goods imported from Canada and Mexico. Last year, about a third of Nissan's nearly one million cars sold in the US were assembled with Mexican plants.
“That will have a big impact on profits,” Uchida, the automaker's chief executive, said last month during a revenue conference call.
Almost all car manufacturers are affected by tariffs. However, the impact could be the most decreasing for those already facing financial difficulties. This includes not only Nissan, but Stellantis, the manufacturer of Chrysler, Dodge, Jeep and Ram vehicles.
Trump suggests collecting up to 25% on most products manufactured in Canada and Mexico. This is both a US trading partner and a member of the North American trade zone that has essentially operated as a tariff-free trade zone for the past 30 years.
Tariffs of that magnitude increase the cost of automakers, increase the prices consumers pay for new cars and trucks, destroy complex supply chains that often include engines, transmissions and other components, and cross borders several times before the finished vehicle arrives at the dealer lot.
The Trump administration has not yet explained how tariffs will apply to US engines and other components sent to Canadian and Mexican plants before returning to the US on completed vehicles.
For many automakers and parts suppliers, tariffs will likely force them to cut jobs and production, rethinking their manufacturing strategy in North America.
Anderson Economic Group, a consulting firm in East Lansing, Michigan, estimates that a 25% tariff will add between $1,000 and $4,000 to the price of the new vehicle.
“Manufacturers and suppliers will be rushing to eat some of the costs imposed by customs duties because they cannot immediately change sticker prices for retail cars or existing sales contracts.”
Last week, Stellantis reported that its net profit for 2024 fell 70% to €5.5 billion, or $5.7 billion. Its CEO resigned late last year, and the company may not have a replacement for several more months.
In a recent revenue call, automaker chairman John Elkan said last year was “a year we are not proud of.”
Elkan acknowledged that tariffs could make the stars more difficult to turnaround. Approximately a third of the highly profitable RAM pickups are assembled with Saltillo plants in Mexico. They also manufacture two Jeep models on Toruca's second Mexican plant. He plans to build a Chrysler Pacifica minivan at his factory in Windsor, Ontario, and start creating Dodge chargers at the same factory this year. The second factory in Brampton, Ontario is being remodeled with plans to make a jeep when reopened.
Elkan said the company has prepared a series of measures to limit the impact of tariffs but refused to provide details. Automakers could increase RAM production at their US truck plants and reduce production from Saltillo.
“We're ready and there are a variety of scenarios,” Elkan said. “Of these scenarios, it's too early for us to discuss it.”
Like the Stellantis, General Motors has made a significant portion of Mexican pickup trucks, adding them to Chevrolet Blazers and GMC Terrain Sport Utility vehicles. It says that adjusting production to produce more vehicles with US plants and importing less from Mexico and Canada can alleviate the tariff hit.
However, GM is on a much stronger financial foothold than other large automakers. The company's sales are rising in North America, the most profitable market, reducing its struggling division, including its operations in China, and closing cruises in its autonomous taxi sector.
Ford Motor – another manufacturer currently in the conversion – is making Mexico's Mustang Mach-E electric vehicle. There are also factories in Canada that plan to start manufacturing large pickup trucks next year. The majority of its models are assembled with US plants, but they rely on Mexican plants and suppliers, with more than a quarter of the parts that fall into many of its models.
Ford CEO Jim Farley said in a recent investor presentation that tariffs “punch holes” in the US automotive industry.
Volkswagen could feel the squeeze from the tariffs as it works to reduce costs and revitalize its revenues.
In 2024, Volkswagen sold over 230,000 Mexican-made vehicles in the US, selling around 60% of the country's sales, the company said.
This includes three Volkswagen selling vehicles in the US. Jetta sedans and Taos and Tiguan SUVs have one factory in the US in Chattanooga, Tennessee, which manufactures other SUVs.
For Nissan, tariffs could force a broad reshaping of the manufacturing footprint. New taxation on goods made in Canada and Mexico will raise costs for Nissan when they are in a hurry to cut costs.
Amidst a global slump in sales, the automaker reported a loss of 14.1 billion yen, or $93.6 million, for the three months from October to December, compared to profits from the same period in 2023.
The company also revised its outlook, saying it expects a loss of 800 billion yen for the fiscal year ending March 31st.
As part of its turnaround plan, Nissan aims to cut global production by around 20%. Since the end of its merger meeting with Honda, the company has been looking for new partners or investors to support its recovery efforts.
Trump's proposed tariffs would complicate the task. Last year, Nissan sold over 300,000 Mexican cars in the United States. Includes Sentra, Versa and Kicks Models.
Uchida said Nissan could transfer production of these models to Japanese plants. Trump has not targeted new tariffs, at least so far.
“Some of these models could be produced in Japan,” he said. “It's one of the backup plans to address the possible 25% tariffs.”
