In today’s Finshots, we discuss what’s ailing the Japanese carmaker Nissan and the burgeoning EV industry in China.

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The Story

Japanese carmakers are struggling.

In fact, reports suggest that Nissan is on the brink of bankruptcy. Its sales have declined, its profits are at an all-time low, and it has to cut costs tremendously. That’s also why it’s closing operations in a few places in its two major markets, China and the US. Each of these markets contributes nearly 25% to its sales. And to top it all off, it is scaling back in other regions, such as South Asia too.

So, what went wrong with Nissan, you ask?

Let’s take it from the top.

Nissan’s Datsun model captured the American car market in the late 1950s with its reliable and affordable cars. It was smooth sailing for more than six decades. However, as the automotive world evolved, hybrid gasoline-electric vehicles started gaining popularity worldwide. Failing to launch competitive models, Nissan began losing its sheen.

Meanwhile, China’s electric vehicle (EV) market took off. Domestic manufacturers, mostly electric ones, flooded showrooms with cutting-edge EVs at affordable prices. And Nissan simply couldn’t match the momentum.

Ironically, Nissan was ahead of the curve in the EV space when it launched the LEAF, a fully electric car, in 2010. However, LEAF had one major flaw. Its battery could only assist in travelling 700 kilometres before needing expensive repair work. Now, even though Nissan had other better EVs in its portfolio, like the Ariya SUV, which found immense success in the US, these couldn’t increase its EV market share meaningfully, especially in China and other emerging markets.

Not only Nissan but also other Japanese legacy players like Mazda, Mitsubishi, Honda, Suzuki and Isuzu have been facing similar setbacks in declining sales, partly due to their limited offerings of plug-in hybrid or fully electric models.

Now, despite these setbacks, Nissan refuses to give up. It is considering a merger with another Japanese giant, Honda Motors, to navigate the challenging auto market. Both companies hope to notch up their game by pooling resources to develop essential EV technologies in-house.

Also, Nissan plans to introduce new hybrids and EVs in the US by 2028, while Honda is targeting a complete shift to battery and fuel-cell EVs by 2040. So, considering these targets, the merger seems the right move right now.

But that begs the question. Can they actually compete with the Chinese EVs that have taken the world by storm?

To understand that we’ll have to take a closer look at the numbers. In 2023, Chinese car manufacturers sold an eye-popping 8 million EVs in their domestic markets, making up nearly 60% of global EV sales. That’s not all. In 2023, China clinched the title of the world’s largest auto exporter from Japan, shipping over 1.2 million EVs out of 4 million cars worldwide. And these EVs are making waves in every corner of the world.

Take Europe, for example. Chinese brands like BYD, NIO and SAIC’s MG are gaining ground with affordable, chic and feature-packed EVs like the MG4. You can spot numerous MG models in India, too.

In Southeast Asia, the story is quite similar. Thailand has seen EV registrations quadruple, with Chinese companies dominating the market. BYD even set up a production plant there in 2023. Similarly, newer Chinese players like Chery and NETA outpaced traditional Japanese brands like Honda and Nissan in Malaysia. Meanwhile, Indonesia’s bestseller is Wuling’s Air EV, which is Chinese again.

Chinese automakers also made inroads into Latin America, Africa, and the Middle East. In Brazil, Chinese BYD and Great Wall are leading a surge in EV registrations, with BYD even setting up its first plant in Brazil to produce EVs locally. In Uzbekistan, electric car sales rose after BYD partnered with UzAuto Motors to produce 50,000 EVs annually. In Jordan, EV sales already represent over 45% of the market, thanks to its much lower import duties on EVs than on ICE vehicles.

Even Tesla was replaced by Chinese rival BYD, which became the world’s top-selling electric carmaker at the beginning of 2024.

So, what’s driving China’s EV success, you ask?

For starters, affordability.

China is the undisputed king that controls much of the global battery supply chain. While it makes its own batteries, the rest of the world depends on China for them. Over 60% of EVs sold in China last year were cheaper than gasoline cars, thanks to China’s battery-production ecosystem, which makes batteries cost-effective and sustainable.  

In addition, it’s been busy securing a stable supply of critical raw materials (CRM), like lithium, nickel, cobalt, etc., needed for battery production. In African countries, for instance, Chinese companies have invested heavily in mining operations with tremendous reserves of these rare metals. In Latin America, China has also grabbed stakes in lithium mines in Argentina and Chile. And as you probably know, lithium is the lifeblood of EV batteries.

China’s foresightedness for battery production technologies and raw materials has paid it quite well!

But it doesn’t stop there. China is also gearing up to own the battery recycling market. By 2030, it might handle upwards of 70% of global battery recycling. Now, that’s a big deal. This means that China can create a circular economy, reuse materials and reduce the need for fresh raw resources for battery production.

Plus, you can’t ignore the Chinese government pumping massive subsidies for electric car manufacturers, making their journeys a whole lot smoother. To put things in perspective, China’s electric vehicle industry received upwards of $200 billion in government subsidies and aid from 2009 till the end of 2023.

Not just this, Chinese EVs are packed with state-of-the-art features, from extended ranges to smart tech integration. These vehicles naturally appeal to younger, tech-savvy consumers who value features like advanced infotainment systems and autonomous driving capabilities.

So yeah, this was the long and short of it.

While Nissan and Honda’s merger might give them a fighting chance, the EV game isn’t just about cars anymore—it’s about building an ecosystem. China is miles ahead with localised production, advanced battery tech and recycling initiatives that lower costs.

In such a scenario, the question remains. Will Nissan, Honda and other global car manufacturers rise to the challenge, or will China leave them in the dust?

Until then…

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