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Nissan chief welcomes Yen's fall

2013-05-15 07:53

HOT OFF THE LINE: Infiniti president Johan de Nysschen (left) poses with Nissan CEO Carlos Ghosn with the Japanese luxury brand's Q50 hybrid.


TOKYO, Japan - Nissan president Carlos Ghosn welcomed the Yen's decline to what he called "neutral" levels for the Japanese automaker's profitability but said it must drop further to be "normal."

"The abnormal situation of the yen is hopefully something of the past," he told reporters at the roll-off ceremony for a new Infiniti luxury model, the Q50.

Workers cheered as Ghosn toasted the first Q50 off the line with an energy drink and a speech in Japanese.

Infiniti, which is not sold in Japan, is exported to South Africa, USA, Europe, Asia and other regions and Nissan is eager to expand Infiniti sales to other markets such as China, the world's largest luxury car market.


Japanese automakers have been trying to move production to where their vehicles are sold to reduce risks from a strong yen, which lowers the value of their overseas earnings.

The yen has lost more than 20% of its value against the dollar since January 2013 due to the monetary easing and inflation target policies of prime minister Shinzo Abe who took office in 2012. The drop is a boon for giant Japanese exporters such as Nissan.

Ghosn said while the dollar was at 75-80 yen through the previous two years Nissan lost money on every car it built at the Tochigi Infiniti plant, 100km north of Tokyo.

He said the dollar trading at about 100 yen, which it did in May 2013 for the first time in four years, was merely neutral and that it should fall to 110 yen or 112 yen, the average over the last two decades, which he called "normal".

Keeping production in Japan has been a challenge for Japanese automakers but pressure is high on the companies to keep jobs in Japan as a social responsibility.

Maintaining the production of luxury models, or other special vehicles such as gas-electric hybrids or electric cars, is one option because Japan has the workforce. 

Production will be kept closer to research and development but some analysts warn that the cheap Yen won't be enough to stop more production moving out of Japan, where the auto market has stagnated.


Growth is expected in places such as China, India and South America, they said.

Masatoshi Nishimoto, an analyst at IHS Automotive in Tokyo, said: "The perk from the cheap yen is momentary."

The favorable currency rate would help to boost the profits of Japanese automakers but they may choose to invest that in marketing or development and continue to expand production abroad.

Ghosn said Nissan expected sales of the Infiniti to grow overseas and it had not yet made a decision about whether to sell the cars in Japan.

Nissan is targeting 10% of the premium auto market, which would mean its annual global sales of luxury models must grow from the current 160 000 to 500 000.

Toyota, meanwhile, has has committed itself to making three-million vehicles in Japan, half of which are exported. Sceptics say it is almost impossible for Toyota to sell 1.5-million vehicles annually in Japan because the population is shrinking and car ownership is less of a priority for a younger generation of Japanese.

Toyota  president Akio Toyoda said cheap yen is a blessing and feels like "the wind blowing from behind but we can't be responding each time to currency shifts."

Honda president Takanobu Ito agreed. The cheap yen, he believed, was a plus only in the short term; it could work as a minus in other ways because of rising raw material costs.

Ito said: "What's best is that currencies remain stable."

Honda already has 80 % of its overall production abroad.

Ghosn said the cheap yen meant Infiniti production would remain in Japan although its production abroad was likely to expand. He declined to say where the new production was being planned.

Ghosn said: "It's a complement, not a substitution."
Read more on:    models  |  toyota  |  production  |  yen  |  nissan  |  car

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