Nissan Motor Co., Ltd. (PNK:NSANY) Q4 2024 Earnings Call Transcript

Nissan Motor Co., Ltd. (PNK:NSANY) Q4 2024 Earnings Call Transcript May 13, 2025

Nissan Motor Co., Ltd. misses on earnings expectations. Reported EPS is $-0.43 EPS, expectations were $-0.3.

Julian Krell: Welcome, everyone, to the Nissan Financial Results for the Fiscal Year 2024 the Investor and Analyst Session. This is Julian Krell speaking, Head of Investor Relations. Thank you very much for joining. The presentation material can be found on the Nissan IR website. Please be informed of the disclaimer included on the last page of the document and read it carefully. Thank you. For today’s presentation, I am joined by Ivan Espinosa, President and CEO; and Jérémie Papin, CFO. Mr. Espinosa will begin the presentation with a brief introduction. Following that, Mr. Papin will present the financial results for the fiscal year 2024 and the fiscal year 2025 outlook. Afterwards, Mr. Espinosa will provide an update on Nissan, the new recovery plan. As always, the session will conclude with a Q&A for which additional members are joining today. So, Ivan, thank you very much for your time. And over to you.

Ivan Espinosa: Thank you, Julian, and good evening, everyone. Thank you very much for joining as we are announcing our results for FY 2024 and our plan to recover and position Nissan for long-term success in this very challenging environment. Thank you for allowing us, first of all, the time to do a deeper dive into the situation and develop a prudent plan. Since taking office and with the support of our new and strengthened executive quality, we conducted a comprehensive assessment of the situation, including asset review, and made a careful decision to impair production assets in key markets. Today, I will be sharing our recovery plan, Re:Nissan, with all of you in light of the fiscal year results. But before that, Jérémie will cover the FY 2024 and FY 2025 outlook. Over to you, Jérémie.

Jérémie Papin: Thank you, Ivan. Good evening, everyone. Fiscal year 2024 has been a challenging year for us. and we anticipate that these changes will continue into fiscal 2025 as we focus on rebuilding Nissan. We are taking strategic actions to address performance gaps, while navigating market uncertainties. I will take you through our financial results for the 12-month period to March 31, 2025. Nissan’s revenue was JPY 12.63 trillion for the period, down 0.4% year-over-year. Although revenue remained flat, operating profit decreased to nearly JPY 70 billion, impacted by lower volume, weaker mix, pricing pressure and increased costs. As referenced in April, these financial results include impairment charges of nearly JPY 500 billion and restructuring costs of close to JPY 60 billion.

Combined these items, along with the release of deferred tax assets resulted in a net loss of JPY 671 billion. Later in this presentation, we will address the ongoing recovery of Nissan and additional detail on the necessity of these impairments and restructuring costs. First, I will go through our performance for fiscal year 2024. Total global retail sales decreased by 2.8% year-over-year with China volumes nearly 100,000 units lower than the previous year. Excluding China, unit sales were flat driven by new model launches, North American sales rose by 3%, which offset declines in other regions. Europe was down by 3%, Japan by 5%, and other markets by 1%. In China, retail sales decreased by 12% as we continued to adjust supply to demand and face intense competition from domestic brands.

For the fourth quarter ending March 31, global retail sales decreased by 5% with China down by 20%. Excluding China, retail sales in the fourth quarter were down by 1% with 10% decline in Japan, 3.5% in Europe, and 3% in other markets. The decline in consolidated retail sales was offset by a 5.5% increase in quarterly unit sales in North America. This slide highlights our key financial performance indicator on an equity basis for the full year. Net revenue on a consolidated basis was flat at JPY 12.6 trillion. Last month, the financial outlook was revised forecasting an operating profit of JPY 85 billion. However, following our final audit, the operating profit for the fiscal year totaled JPY 69.8 billion, resulting in an operating margin of 0.6%.

Q&A Session

Including the impairments of over JPY 460 billion, restructuring cost of nearly JPY 60 billion, and higher taxes were reporting a net loss of JPY 671 billion for the fiscal year. Despite the challenges, we continue to invest in new products, services, and technologies, which are critical to the future. This led to higher CapEx at JPY 577 billion and maintaining R&D spending of JPY 620 billion. Net revenue for the automotive business was JPY 11.4 trillion, and operating loss in autos was JPY 216 billion. Due to negative auto profit and increased CapEx, free cash flow for the automotive business was a negative JPY 243 billion. Automotive net cash for the period was JPY 1.5 trillion flat year-over-year. Next, I would like to explain the variance factors for operating profit from the prior year to this fiscal.

Against the JPY 569 billion operating profit in fiscal 2023, we saw a positive impact from foreign exchange of JPY 36 billion. The U.S. dollar was stronger, however, this was offset by declines in other currencies. Our material cost had a positive impact of JPY 13.6 billion. The largest negative contribution resulted from the decline in sales performance, which was down by almost JPY 300 billion. This was due to weaker unit sales volume, higher variable marketing expenses, and some lower after sales revenue. The Monozukuri cost had a negative impact of JPY 7.9 billion, as increased costs for regulatory and product enrichment offset improvements in manufacturing costs, logistics, and R&D. Inflation had a negative impact of JPY 106 billion, with inflationary pressure felt along the Monozukuri and G&A functions and affecting your cost-cutting efforts and our supplier costs.

Other costs including, seen normalization in credit losses from sales finance and weaker remarketing results had a negative impact of JPY 135 billion. As a result, operating profit decreased to JPY 69.8 billion. For the fourth quarter, operating profit decreased to JPY 5.8 billion. This was primarily due to a weaker contribution from sales, along with higher raw material costs. Having reviewed last year, let’s look ahead to fiscal year 2025. Overall, unit sales for the upcoming fiscal year are expected to decrease by 2.9% to 3.25 million units. This expected decline, which excludes potential impacts from higher tariffs, is mainly from an 18% sales decline we forecasted for China, while we expect retail sales excluding China to be slightly up 1%.

Sales in Japan, North America, and Europe are expected to be flat. However, sales in other markets are forecasted to increase by 6%, in particular, in Brazil and India. Global production volume is projected at 3 million units, adjusted to a reduced volume outlook to manage inventories. This slide illustrates the operating profit variance analysis for the fiscal year 2025 outlook, excluding potential tariff impact. ForEx headwinds are projected at JPY 120 billion. We expect a small positive contribution from raw materials. The sales performance is anticipated to improve by JPY 60 billion, in particular through an improved cash flow management, and new model launches in the second half of the year. Better manufacturing cost management improved logistics, and the push on total delivered costs are anticipated to positively contribute to JPY 160 billion for Monozukuri with cost savings broadening as the new plan ramps up.

However, these gains will be offset by inflationary cost of JPY 145 billion and other expenses of JPY 45 billion that include higher CO2 emission-related costs. Operating profit is expected to breakeven for fiscal year 2025, excluding the potential impact from tariff. I will now discuss our assessment of the current situation regarding U.S. tariffs. Our exports from Mexico and Japan account for roughly less than 45% of our total U.S. sales. We estimate that our negative gross impact before any mitigation is JPY 450 billion. However, we aim to mitigate this impact through various measures. On the upper right-hand side, you can see a list of the measures we are implementing. In Q1, these actions could enable us to mitigate approximately 30% of the expected tariff impact.

For fiscal year 2025, we expect net revenue to decrease to JPY 12.5 trillion. The guidance for FY 2025 operating profit, net income and auto free cash flow is still to be determined. The uncertainty comes from the potential impact of tariffs and additional restructuring costs which are currently being assessed. However, for the first quarter, considering the impact of tariffs, we are forecasting net revenue of JPY 2.75 trillion and an operating loss of JPY 200 billion. Auto free cash flow for the quarter is expected to be a negative JPY 550 billion. Following Nissan’s seasonal pattern, the first quarter is expected to be our most challenging period. As the year progresses, we expect to see steady improvement driven by a refreshed product portfolio and the impact from our cost reduction strategies.

On liquidity, we have a total available liquidity of JPY 3.4 trillion in the auto business. This includes JPY 2.2 trillion of cash and cash equivalents and around JPY 1.3 trillion of auto cash loans outstanding to sales finance companies. Additionally, we have JPY 2.1 trillion in unused committed credit lines that are fully available, with approximately JPY 600 billion allocated specifically to the automotive business. At the end of fiscal year 2024, our automotive debt stood at nearly JPY 2 trillion, of which about JPY 700 billion matures in fiscal year 2025, we’re planning to refinance between JPY 400 billion and JPY 600 billion of the debt maturing. Therefore, we expect to end fiscal year 2025 and enter fiscal year 2026 with total debt ranging between JPY 1.6 trillion and JPY 1.8 trillion.

To sum up, FY 2025 would be a year of transition for us, a year of decisions. We have enough liquidity to cover our funding needs, which will support us as we restructure the business. While FY 2025 is a year of challenges and uncertainties, the actions we are implementing as part of our new recovery plan are designed to yield positive results in FY 2026. Thank you for your continued support and confidence in our journey ahead. I’ll now hand it back to Ivan.

Ivan Espinosa: Thank you, Jérémie. As you can see our full year financial results are a wake-up call, but reality is clear. Our variable costs are rising, our fixed costs are higher than our current revenue can support, and as Jeremy said, FY 2025 is a year of transition. So, we are taking a prudent approach and keeping our revenue assumptions flat. The reality is clear, we have a very high-cost structure, and to complicate matters further, the global environment is volatile and unpredictable, making planning and investment increasingly challenging. Hence, Nissan must prioritize self-improvement with greater urgency and speed, aiming for profitability with less reliance on volume. This is what we are setting out to do with our new recovery plan, Re:Nissan.

Our plan outlines three key drivers that will help us achieve positive operating profit and positive free cash flow by fiscal year 2026. These are reducing costs to aim for breakeven, redefine product and market strategy with a sharper focus, and reinforcing partnerships to complement our strategies. Let me talk through in detail. Reduce cost, this is the area where we need to go further and faster. With the help of cross-functional teams, we have reassessed and scrutinized all the assumptions in which forecasts were based in the past. Given our structural challenges and market conditions, we need to deliver more cost reductions on a significant larger scale. Our new target is total savings of JPY 500 billion, which includes JPY 250 billion from variable costs and another JPY 250 billion from fixed costs.

We have increased our target for variable costs and we plan to further reduce these costs in FY 2027 to achieve a solid and sustainable profitability. Now, let me clarify why there are two sets of numbers. We are presenting the targets alongside the most recently announced figures to illustrate the extent of the reductions being implemented. The earlier targets were based on assumptions from the Arc business plan. Now, our goal is to establish realistic and measurable targets based on the actual results from FY 2024. We will be tracking our progress on these targets and reporting in a timely manner. To achieve the magnitude of variable cost reduction, we need a dedicated program and task force. We have already established a new variable cost transformation program to realize maximum engineering and cost efficiencies.

Another big area is our supply chain. We are rethinking our supply base to ensure more volume for fewer suppliers and increase efficiencies while benchmarking. We will also be challenging our internal standards for more practical outcomes. With this, we aim for a 10% reduction over 3 years with the potential for further significant savings in FY 2027. The task at hand is very big and very challenging. We need a strong governance model to ensure we identify, execute, and achieve our reductions quickly. Hence, we created a sprint team under our Chief TdC officer, who will directly report to the executive committee. We have allocated 300 cross-functional and cross-regional experts to divert their efforts and expertise to achieve this goal. We have already organized more than 66 commodities and identified at least 19 different activities.

This team has already generated a total of 2,300 ideas with more than 800 ready for implementation amounting to JPY 75 billion in FY 2026. Many more ideas will follow, and we are pushing to bring them faster. Additionally, we will be pausing some advance and post-FY 2026 projects, and with that we will be able to reassign 3,000 employees to work on TdC reduction. This will not delay our productions start for new vehicles thanks to our shortened development process. The resources we are allocating, demonstrate the importance we place in this area and our commitment to succeed in this front. While we work diligently in variable cost reduction, we will see further efficiencies to reduce our fixed costs. There are several initiatives that let me highlight some key measures that demonstrate the scale of the actions.

First is to restructure manufacturing. This includes consolidating our vehicle and powertrain plants globally, including Japan. This will require reducing the number of our manufacturing plants from 17 to 10 and increasing utilization rate to 100% by FY 2027. We will reduce our production capacity to JPY 2.5 million by FY 2027, with the option to increase it by JPY 0.5 million if demand arises. Additionally, we will utilize our partner plants to support production as needed. We have already taken quick and decisive actions, such as consolidating the pickup production from Argentina to Mexico, reorganizing operations in India with our partner Renault, and stopping investment in an LFP battery plant in Japan. As part of our Re:Nissan program, we need to implement further workforce optimization, primarily driven by our plant consolidation efforts.

We’re aiming for a revised global target of 20,000 people by FY 2027, with roughly 65% coming from manufacturing, 18% from SG&A functions, and 17% from R&D, mostly contractual staff. While this decision is essential for enhancing operational efficiency and ensuring long-term sustainability, we will ensure necessary support to affected employees during the transition. In addition to these reductions, we will focus on lowering labor costs and expenses, expanding utilization of shared services, and achieving greater marketing efficiencies. In the area of development, we will focus on improving efficiency in three key areas: cost of engineering; complexity; and speed. We aim for a 20% reduction in workforce average cost per hour by rationalizing our global R&D facilities and allocating work to the most competitive locations within the Nissan Global R&D footprint.

In addition, we are targeting complexity reduction in two major areas. The first is parts complexity, which we aim to reduce by 70%. The second area is platform reduction, and while this takes time, it will help reduce engineering workload in the short-term. We plan to cut the number of global vehicle platforms by nearly half, from 13 to 7, by fiscal year 2035. And regarding speed, we have outlined efforts to shorten development lead times through the family development concept. We have invested significant energy into this initiative, and we are excited to announce for the first time professional vehicles that will emerge from this process. The all-new Nissan Skyline and all-new Global C segment SUV and all-new INFINITI Compact SUV. Here, you can see the timeline for implementation extending through FY 2027.

This timeline reflects our commitment to executing these tasks and underscores our dedication to transparency in our processes. We believe in open communication with our stakeholders and this timeline will serve as a tracker to demonstrate our progress and the impact of our initiatives. We fully expect to be held accountable for our announcements. Now, I would like to explain our second area of focus. Our redefined strategy for markets, products and partnerships. As previously stated, we understand that a sustainable recovery plan cannot rely solely on cost reduction. It must also be supported by strong product offerings. To this end, we will concentrate on developing vehicles in core market segments, while collaborating with partners to create vehicles tailored for other markets and needs.

Here, you can see the segments in which Nissan will develop vehicles and how we will leverage our partners to support other segments and markets. For instance, we will collaborate with Renault in Europe, Mitsubishi in the U.S., and Dongfeng Nissan in China, not only for the Chinese market, but also for exports. We will leverage models from one of these approaches to cover other markets and explore further collaboration opportunities in the U.S. to adapt to the evolving market environment. We will prioritize markets and products to ensure we have the right models for the right markets at the right price points, aligning supply with demand. This involves establishing distinct strategic positions for each region. In the U.S., our focus will be on crossovers and SUVs. We plan to offer more hybrids and reinvigorate INFINITI’s market presence.

In Japan, we aim to renew Nissan’s distinct brand appeal, while driving up our average price by leveraging larger size models and signature technologies. In China, we will more effectively leverage our joint venture to lower costs and optimize the production of new energy vehicles. Additionally, we will begin exporting our NEV models to markets outside China, ensuring speed, cost competitiveness, and innovative technologies. In the high growth Indian market, we will renew our product lineup and maximize synergies within the alliance. We have already taken a step in this direction by transferring control of our plant in India through Renault, allowing our alliance partner to assemble next generation models for Nissan and enabling us to capture export markets.

In Europe, we will strengthen our presence by assembling more electrified models in Sunderland and utilizing our alliance relationship with Renault to take advantage of their assembly lines and electric vehicle architectures. Finally, in Mexico and the Middle East, we will capitalize on our strong brand position to sustain the profitable business we have established in those regions. In very simple terms, all our product efforts must be aimed at making the heart of Nissan beat stronger. We will prioritize our portfolio investment around three key objectives. First, we must retain our core business and current customers by providing vehicles that they value. Second, we will focus on geographical and segment growth to attract new customers in targeted markets.

And third, we will enhance our marketing and sales efforts for our iconic models which represent the heartbeat of Nissan to reignite customer passion for our brand. We take pride in our heartbeat models which reflect the true DNA of Nissan. They are defined not just by sales volume, but by their iconic design, engineering ambition, and most importantly, by how they fully represent Nissan’s values. Additionally, partnerships will enable us to cover various segments and regions with optimized investments, allowing us to refocus our resources on core project priorities. Our focus on core models will be supported by complementary vehicle development in collaboration with our partners. With Renault, we will enhance our collaboration in Europe, India, and Latin America.

We are also working with Mitsubishi Motors and Honda to explore advancements in vehicle intelligence and electrification. Specifically, with Mitsubishi Motors, we are collaborating on pickups and EV battery sharing. We will continue to actively seek business collaboration in the U.S. to adapt to evolving market conditions. And in addition to our partnership projects, we are continuing our strategic review process, and we will, of course, provide updates at the appropriate time. We are not only committed to the actions we take, but also the results that they yield. To drive this change, we are establishing a special steering committee to oversee initiatives in all areas. This committee will bring together our best and brightest from both regional and global teams, ensuring a comprehensive coverage, visibility, and accountability.

I will be chairing this committee with the support of the Executive Committee of Nissan. I extend my gratitude to the senior leaders and the wider executive team for the dedication to the task ahead, as well as to the employees for their invaluable support in achieving our goals. In conclusion, I would restate that our fiscal FY 2024 results have exposed the urgent need for recovery at Nissan. To safeguard our future, we have to go further and go faster. We have a mountain to climb from the losses we are announcing today. With our path forward, the Re:Nissan recovery plan is action-based, grounded in reality, and driven by determined actions. It will not be easy to deliver it. It will require dedication, discipline, and hard work in every part of the organization.

But I’m confident that we have what we need to rebuild our company. We will need the understanding and support from our valued rather business partners and stakeholders, as well as collaboration from future partners. And with a shared mission, Nissan people have the skills and ability to return Nissan to its rightful position. As I have stated before in several forums, I truly believe there is no competition that cannot be won by working together as one team. And, today, we’re starting the building of the future of Nissan. Thank you for your attention.

A – Julian Krell: Thank you, Ivan. We are now starting the Q&A session. [Operator Instructions]

Operator: Okay. Citi Securities, Yoshida-san. Go ahead.

Arifumi Yoshida: Yes, thank you for the opportunity. I am Yoshida from Citigroup. In fiscal year 2026, you are going to reach a breakeven of OP. That’s what you showed us. But on the other hand, the restructuring will benefit from 2027 onward in particular, at that time, utilization rate will reach 100%. In 2027, utilization rate of 100%, at this time, what is the operating profit that you are assuming as a target for 2027? That’s my question, first one. And another question is simpler. Tariffs impact JPY 450 billion that you showed us this estimation. What are the assumptions that you used to estimate this? For example, suppliers brought out parts assumption. Could you give us the details of the assumptions for JPY 450 billion in tariff impact? Thank you.

Ivan Espinosa: Okay, so let me start to answer the first question. The restructure will not only start from 2027. There’s a few things that we are laying down today that will kick in from 2026 and even earlier. We’re just looking, probably, you’re just looking at the fixed cost side of the equation. As I explained, the variable cost plays a very important role as well. On the variable side, as mentioned, we have already put in place a team of 300 people, and they have found opportunities that add up to JPY 75 billion in 2026. And this is before the additional 3,000 engineers that we will dedicate in the coming months to cost reduction efforts. So, we can expect to see further improvement before 2027. And there will be a gradual rollout of the measures of restructuring.

It’s true that part of it will come in 2027, but also we will see gradual flows as we go in the years before then. As for the target, what we’re saying today is auto OP for 2026 and free cash flow positive in 2026. And, of course, the targets for 2027 should go beyond that. We don’t have a concrete number to show today, but of course you should be piling up and adding on top of this target that we are giving. As for the tariffs, I will ask Jérémie to share a bit of detail of the assumptions behind the JPY 450 billion.

Jérémie Papin: So as regards tariffs, we shared with you our exposure, the total exposure is JPY 450 billion. I would say roughly two-thirds of the exposure is linked to the imports. And we have shared with you the imports from Mexico and from Japan. And within those, even though they are not the same size, they are fairly similar in terms of exposure. And the last third of the exposure is parts going into the U.S. market for our plants. That’s the breakdown of the JPY 450 billion.

Arifumi Yoshida: Okay, thank you. One additional question. For example, there’s JPY 500 billion of cost reduction that you announced. For example, what’s the benefit in 2025, benefit in 2026 and benefit on 2027? What’s the breakdown of benefit of cost reduction of JPY 500 billion over the years? And that tariffs, parts, includes many things, the USMCA is part of it, right? And there is an exemption that is given. How far did you reflect for the parts tariffs impact?

Ivan Espinosa: Okay. Let me try to answer the first question. So the targets that we announced today are JPY 500 billion, as you see on the screen, versus FY 2024 actuals in 2026. So, we are expecting the JPY 250 billion of variable and JPY 250 billion of fixed to come in FY 2026. And as I said earlier, the visibility we have today for variables are already in the order of magnitude of JPY 75 billion. Yeah, as for the tariffs, maybe – I’m sorry, Jérémie, I’m turning to you, can you elaborate on that?

Jérémie Papin: Yeah, on tariffs, again, where there is USMCA compliance, there is no tariff. And so, what we have used in the moment is what’s in market as April and May as a guidance for the full year.

Arifumi Yoshida: Okay. Thank you.

Operator: Thank you very much. UBS Securities, Takahashi-san. Please go ahead.

Kohei Takahashi: UBS Securities, my name is Takahashi Kohei. Thank you for this opportunity. First, what can a company like Nissan become in the future? That’s my point of interest. Page 28 of the slide is the specific slide to which I am talking about. The size will become between JPY 2.5 million to JPY 3 million in capacity, so the vision exposure and product exposure will be unlike what you are today? Who you are today? And which resources are you going to be reducing in terms of allocation and where are the areas where users will be increased? So it can be able to – how you look like today. What will be the recent profile in the future? That’s my first question. And the second question is Slide #5, and numbers, did cash position JPY 1.5 trillion unchanged 2023, 2024? Free cash flow is negative. So already, as explained in Q1 and Q3, once again, why is free cash flow negative and yet you were able to maintain net cash? Those are my two questions.

Ivan Espinosa: Let me start by answering the first question. Today, we are already at the size of JPY 3 million in terms of sales. As you said, the capacity that we are putting is JPY 2.5 million. However, with flexibility upwards, we can add JPY 0.5 million, and then with our partner projects, we are commanding around 400,000 units. So, if we have the need to grow, there is some upward flexibility, as I just explained. In terms of what we plan to reduce and what we will focus on, as you see on the screen, we have defined the core segments and markets in which we will dedicate our own engineering resources and these areas are the areas in which Nissan excels mainly B and C segments in the markets that you see on the screen and frame vehicles for North America and Mexico and also these vehicles will be exported to some other destinations.

Then, we are leveraging on partners that we have, as you see, we’re co-developing projects with programs with Mitsubishi Motors and we’re also co-developing programs in our JV with Dongfeng, in Dongfeng Nissan, and we will do those programs for China but we will also be exporting those products and we will continue leveraging what we are doing with Renault. As you see, we’re very collaborating in Europe on some of our base segment products. We are collaborating in India and exporting out of India in the coming years. And we will also be working with them on A segment car. So with this, we reduce the necessity of covering every single market and every single product, with Nissan developed products. One of our focus moving forward, and it’s part of what we are also addressing in our strategic review approach is we would like to find partners that help us find synergies in the markets in which we have a strong presence.

Namely, you can imagine Japan, you can imagine, of course, the U.S., you can imagine collaboration also in future advanced technologies, electrification and autonomous drive, which are areas in which we have a strength today. And we are looking to have a bit of a lighter balance sheet by offloading some of the older technologies. You can imagine ICE and hybrid potentially could be in the coming years offloaded if we succeed in finding the right partner to do so. So these are kind of a direction that we are taking and how we plan to shape the company moving forward. As for the cash, maybe I don’t Jérémie, you can elaborate on that?

Jérémie Papin: Yeah, on cash, there were dividends from intersegment companies to autos. So that’s what allows us to maintain net cash.

Kohei Takahashi: So, okay, the first question, could you elaborate? I would like to elaborate JPY 2.5 million to JPY 3 million in these regions and product, this exposure is too much, don’t you – it’s not too much. While maintaining this portfolio, if you reduce the fixed cost, operating profit margin will increase. Is this the thinking compared to the Japanese competitors and global competitors, your number of products and the sales volume per model seems to be limited and this is one of the reasons for low operating profit margin. How are you going to fix this? What’s the action?

Ivan Espinosa: As we explain in this presentation, we are also reducing the number of platforms that we are working on. So this will of course translate in lower engineering resource utilization, but not only. You can imagine as we go, we need to monitor very closely the portfolio size. And have a portfolio size that is matching the size of volume and resources that we have available. So this can give you a little bit of a flavor of what we’re saying. We’re aiming to reduce the global platform count towards 2032 by from 13 to 9, with a final goal of 7, which represents a 46% reduction. These dates represent the time at which the models will be hitting the market. So, you can imagine the savings come before because we start investing and working on projects before they hit the market.

This is how we are looking at this. And the other area, if you show the three main pillars slide of strategy, on the presentation we didn’t cover that, but we also have a team looking at top-line. So we have a team that is looking at the fixed cost. We have a team that is looking at the variable cost. And then we have a team that is looking at top-line delivery. So today, as we mentioned, we have a prudent approaching to volume, but we have a team that will also be looking at the top-line to try and protect or grow, if opportunity exists, the revenue moving forward. So these are the actions that we are taking to try and protect the shape and the size of our company. Thank you.

Kohei Takahashi: Yes, let me follow-up again. Thank you.

Operator: Thank you, Takahashi-san. Moving on to Goldman Sachs, Yuzawa-san. Please go ahead.

Kota Yuzawa: This is you Yuzawa. Do you hear me?

Operator: Yes, we do.

Kota Yuzawa: Thank you. I have two questions. The first one, there’s JPY 500 billion of big cost reduction target in the short period of time. I’m sure it was a hard way to define this plan. What is the impact on the bottom-line? This year is a zero assumption. Tariffs is JPY 450 billion. This is a tariff impact. Even if you reduce JPY 500 billion, you can only get JPY 50 billion of profit. So, again, JPY 300 billion operating profit, free cash flow plus there’s something missing. Is there any miscalculation that I made? What’s all behind this target of making it profitable or a positive free cash flow? Another tough question, the 1 million units reduction of the volume and additional headcount reduction by region. Which region are you going to focus on the reduction?

What’s the regional breakdown and what’s the expenses? Not only extraordinary losses for this year including cash and non-cash. How much additional expenses will be incurred because of this rationalization? These are the two questions.

Jérémie Papin: I can take. So the JPY 500 billion of cost savings and I need to be thinking about what are some of the offsets or negatives that we need to face in the timeframe, for example, of emission related cost or penalties. Or the difference between the level of gross savings and what you would have to actually be able to keep on the planet, while securing the market competitiveness. So, again, I think to move from the outlook of FY 2025 to the [breaking in autos] [ph] the several hundred billions of COP improvement. But the JPY 500 billion should cover that and allow us to pay for other negatives that we are forecasting. In terms of regional impact of the restructuring, I think, we’re not providing details, specifics yet.

But as I mentioned, the plan is global and therefore all our operations are being scrutinized and optimized and worked on and would have specific projects to improve their efficiencies. In terms of the restructuring charges, we obviously booked some in FY 2024. At the moment with what we see in terms of timeline of decision and the timeline of implementation, we believe there could be another JPY 60 billion of restructuring charge in FY 2025. And most of the FY 2024, FY 2025 P&L charges will be cashed out in FY 2025. And our intent is to fund these restructuring charges through asset sales.

Kota Yuzawa: Thank you. The first question maybe my question wasn’t clear. Sorry. Auto segment profit is what you are shooting for, but with the impact of tariffs – of course, I hope, I’m wrong. Impact of tariffs of JPY 450 billion this is excluding, that’s right, there’s breakeven, even including that tariffs impact operating profit of JPY 300 billion will be reached. What’s the assumption here?

Jérémie Papin: No. The FY 2026 target whereof breakeven is before tariffs.

Kota Yuzawa: I see. Thank you.

Operator: Next, Mizuho Securities, Ishiyama-san, please.

Yoshitaka Ishiyama: Ishiyama from Mizuho Securities. I hope you can hear me?

Operator: Yes, we can hear you.

Yoshitaka Ishiyama: I have two questions. First, it will be a follow-up to the previous question, but to confirm your philosophy behind for fiscal year 2026 auto business operating positive without tariffs, but what if tariffs continue? What’s the assumption? What are you thinking about the auto business for 2026, will there be additional reduction of fixed costs or will you prioritize using partner and not think too much about further reduction of the fixed costs? It will be purely hypothetical. But what’s the idea behind? That’s my first question? Secondly, Q1 in this fiscal year, this first quarter, you’ve issued guidance. If possible, minus JPY 200 billion operating profit or operating loss, what’s the element? Is it tariff or incentive, or is there one-time cost and free cash flow? There’s a big narrative for the auto business, so what’s the assumption for that figure? Thank you.

Ivan Espinosa: Let me elaborate on the first question, and then I’ll ask Jérémie to support on the second one. As for the first question, if tariffs continue, we need to find levers to overcome them. As we explained or generally explained during the presentation, out of the JPY 450 billion, around 30%, we have managed to find countermeasures in Q1. And these countermeasures were applied in a very short-term. So, we keep working on mitigation levers, including working with suppliers, resource of parts. And also we will have to look at what happens with the market and pricing. And so, this will keep monitoring and keep deploying countermeasures, both in the short-term, but also in the longer-term. We are looking now actively at what and how we could reshape our manufacturing footprint in order to alleviate this.

And as mentioned in the presentation, also a lever in the midterm is to find partners to collaborate with and overcome by utilizing the existing capacity that we have, overcome the challenges that tariffs are representing in the mid-term. So, again, in the short-term, most of the mitigation actions will be looking at costs, looking at pricing, and trying to optimize the available capacity that we have. As you know, we have available capacity in our facilities in Sweden and Compton. We have products that are being prioritized for incentive support and pricing support so that we can balance the overall profitability of the operation in the United States. And in the mid-term, we will look at these additional measures. Yeah. As for the second question on the Q1, Jérémie, can you provide a bit of a breakdown on that?

Jérémie Papin: Yeah. So in a common outlook, it includes the full tariff impact. So that’s definitely built into this assumption over JPY 100 billion of tariff impact. And then the second question on the free cash flow. Free cash flow in Q1 is going to be in particular affected by the working capital swing that we seasonally experience in Q1, where we basically pay a significant amount to our supply base. This year we also have specific payments to the supply base that we also will be doing in terms of supporting some upfront R&D and upfront investments that they are doing for us in order to deliver vehicles later in FY 2025 and FY 2026. So, a significant part of the free cash flow outlook for Q1 is a working capital impact.

Yoshitaka Ishiyama: Understood. Thank you.

Operator: Okay. Thank you so much. Moving to Okasan Securities, Naruse-san, please.

Shinya Naruse: Yes, thank you. I am Naruse from Okasan Securities. Do you hear me?

Operator: Yes, we do. Go ahead.

Shinya Naruse: Thank you. I have two questions too. The first one is powertrain strategy. Is this revised powertrain strategy? e-POWER and EV, did you revise the plan or strategy for these two? In the Q&A earlier, you said that if you select the partner hybrid or ICE will be coming off from the balance sheet. That’s what you said. What’s the intention behind it? Could you elaborate on it? This is my question first one. And the second question is about China, within China not exports. In the full year plan, sales in China will come down by 18% that’s your assumption. According to the new cars that introduced it is well received. But how are you going to approach the competition in China and when are you going to restore the performance in China and the profit in China, within China, of course, it was almost breakeven in the past.

While this is deteriorating, of course, it’s up to the capacity and there are things with stage wise, which restrict you from disclose. Competitiveness, for what are you approach to the competitiveness of Nissan within China?

Ivan Espinosa: So, let me answer first question and then we have with us is Stephen Ma, who is the MC, Chairman for China, so I will kindly ask his help to elaborate on the second one. As for the powertrain strategy, in the short-term, we will deploy hybrid technology particularly in the United States with speed. This is something that we are working on very diligently and we have announced already, so we will start in FY 2025. Later this year, we’ll add a plug-in hybrid value to Rogue, and then the year after, we will be launching the only Rogue with e-POWER technology in the U.S. As for the long-term strategy, my comment earlier was more about the long-term strategy and how we see technology evolving. I think the key thing here is the timing at which we start doing this kind of shift, but if you take a step back and look in the long-term, eventually, ICE and hybrid technologies will tend to slow down, want to go into a lower volume, and it will become gradually more complicated to be competitive in those technologies.

So we are considering, as I said, within the scope of the strategic review, how do we go around this kind of technology, particularly ICE probably in a first step, and then e-POWER could be made at more with EV, because many of the parts are shared between these two technologies, but conventional hybrid might have to be put in a different strategic approach. And so, this is how we are looking at the powertrain strategy today. Again, the environment is a bit volatile, so today, we see the market slowing down, but I think in the long-term the full EV, and NEV application will come, and we need to get ready for that. Thank you. Maybe I’ll hand over to Stephen for the second question. Please, Stephen?

Stephen Ma: Sure. Thank you, Ivan. Naruse-san, it’s good to talk to you again. I’m Stephen Ma. So, regarding China, your question is the reduction of volume year-over-year to 18% for this year, and I want to restore performance and have to build a level, so I’m going to try to address any of the questions. First of all, I think, we were a little bit slow in shifting to NEV in China, whereas the China local brand moved very quickly. So just this year, we are now offering the new EVs that we saw in the Shanghai Motor Show, the M7, we were launching, and we were also launching a Plug-In Hybrid Pickup Truck Frontier Pro, so it’s the beginning of our transformation of a portfolio. Unfortunately, current portfolio we have right now is very old and is predominantly ICE.

And If I look at the very average portfolio age is more than 8 years, close to 9 years. That’s a very old portfolio. So they’re trying to reshape and restructure a portfolio. So this shows a transition here. We are trying to phase into a new car, so it takes a little bit of time to ramp up. This is why we have a very proven view of the balance of this year. Obviously, I’m hoping that we can be better than this, but right now, this is much more a proven and a realistic view. That’s why the balance is the way it is for this year. Hopefully, this will be bottom for this year, and then next year, we can go again in terms of our volume recovery. The profitability level will be able to keep around breakeven for the last couple of years, only because the local team have done a fantastic job in terms of reducing fixed costs and other costs.

Just as a reference for you since 2021, our headcount has reduced more than 30% and also fixed costs more than 30%. That’s how we’ve been able to keep it at the one breakeven level. And the capacity, as you know, has been going down from 1.6 million level to roughly 1.5 million, and then adjusting the shift patterns and reducing the workforce, more capacity is 1 million or less. So, therefore, we are able to keep very efficient operation with lower fixed costs. And I’m trying to maintain plus or minus level for this year. Obviously, the priority for us is to regain the volume on the scale, and we want to maintain this volume are higher. So that’s the main priority for us this year. I think you saw from the Shanghai Motor Show explanation, we’re going to launch two new energy vehicle this year, and then we’re going to be launching few more next year for 12 of 10 by summer [ph] 2027.

So please stay tuned for those. Thank you.

Shinya Naruse: Thank you.

Stephen Ma: Okay. Thank you very much.

Operator: Thank you very much. The next question will be a final question, because we are running out of time. Hakomori-san of Daiwa Securities. Please go ahead.

Eiji Hakomori: Good evening. I’m Eiji Hakomori of Daiwa Securities. Thank you for this opportunity. First question, INFINITI brand, what’s the meaning of continuing to meeting this point, this is 50,000, 60,000 in China and Europe, the volume is going down quite significantly. So, if thinking about the efficiency of engineering isn’t one option to drop INFINITI, according to your presentation, you will refer you to straightening INFINITI in the U.S. market. So, again, what’s the recent data of continuing to have INFINITI in the lineup? That’s my first question. Secondly, in the Q&A, you said in Project TM, you also have established a Project TM that considers top-line. So, to the extent you can share with us, where are the areas where you think there’s much more value for a bit of the top-line still? And you said those are the two questions.

Ivan Espinosa: Thank you. Yeah, as for the INFINITI brand, we want to keep INFINITI, of course, in the U.S., and we are, of course, now considering what we do in China. As for the U.S., one of the things to keep in mind is that our INFINITI products are developed based off Nissan. So, the engineering efficiency is actually positive, because we can do more with the same assets and, at the same time, command a higher price point. What we have to do is to strengthen the lineup, because one of the problems we have today is that we don’t have enough offer on INFINITI. It’s not a problem of the brand itself. It’s a problem of, I would say, lack of proper attention because we were diverting resources into too many places. With this, in focus, we want to leverage on the Nissan assets to create the synergy with INFINITI and bring vehicles into the market.

With speed, with lower investments that are able of commanding a higher price point. So, this is the reason to keep INFINITI. A good example of this is the QX80. So, today, QX80 is the most profitable car that we have in the company. So, this is one of the key reasons to keep investing on INFINITI with an efficient approach that is utilizing Nissan as a starting point. As for the project team, we have maybe a visual there on the material. Again, today, we didn’t explain much, but this year, we’ll absolutely look at opportunities to cover more markets with the same products that we have, controlling VME in a more diligent way. We have a team called a growth acceleration team, which is looking at opportunities for volume by leveraging in cars that are already existing and that we are not capitalizing, because we are, in a way, too busy with the big markets and ignoring those small markets.

When you add these small markets, there’s opportunities that we can capture. Other activities include portfolio revisiting for the different markets and finding opportunities to improve. This includes vehicle portfolio, but also the lineup and what we call grade walk, the way the options are set, the way the trim levels of the products are set, and there’s usually big opportunities in this area, particularly in the big markets like the U.S. and others. So this is what this team is looking at actively.

Eiji Hakomori: Understood. Thank you.

Julian Krell: Okay, then, thank you very much. We’ll now close the session. Thank you for your participation. And the Nissan Investor Relations Team remains at your disposal for any follow-up questions. Thank you and bye-bye.