Nissan’s struggle to regain financial stability has hit yet another roadblock. The Japanese automaker’s much-anticipated merger talks with Honda have collapsed, leaving Nissan to navigate its ongoing crisis alone. The failed negotiations come at a time when concerns about the company’s financial health are mounting, with credit rating agencies downgrading Nissan’s debt to junk status.
With Fitch Ratings and Moody’s both issuing bleak outlooks, the road ahead looks increasingly difficult for the embattled carmaker.
Credit Agencies Sound the Alarm
Earlier this week, Fitch Ratings downgraded Nissan’s unsecured rating from BBB- to BB+, citing “persistently low profitability with a delayed recovery trajectory.” The agency also warned of continued financial pressure over the next two years, noting that Nissan’s restructuring efforts may not yield significant results until at least the second half of 2026.
Moody’s followed suit, assigning a Ba1 rating to Nissan’s debt and reinforcing concerns about its long-term viability. The back-to-back downgrades indicate that major financial institutions see Nissan’s recovery efforts as insufficient, with analysts pointing to sluggish sales, rising costs, and a difficult global market.
Job Cuts and Production Reductions in Motion
As part of its turnaround strategy, Nissan has already announced 9,000 job cuts globally and is planning to reduce production by 20% due to weak demand. While these measures are expected to improve profitability, they may not show significant results until 2026.
Fitch noted that Nissan’s auto EBIT (Earnings Before Interest and Taxes) and free cash flow are expected to remain negative until the financial year ending March 2026. Despite this, the agency acknowledged that Nissan’s strong liquidity and solid balance sheet may provide some buffer against immediate financial risks.
US Tariffs Add Another Challenge
Adding to Nissan’s troubles, potential US tariffs on Mexican-built vehicles could further strain its revenue. Nissan exports around 300,000 vehicles annually from its plants in Mexico to the US. If tariffs increase, Nissan will face higher costs across its supply chain, squeezing profits even further.
The uncertainty surrounding these tariffs complicates Nissan’s strategy in the North American market, where it has struggled to regain momentum in recent years. Any significant changes to trade policies could force the automaker to rethink its production and pricing strategies.
China Sales Slump Deepens the Crisis
Nissan is also facing difficulties in China, its second-largest market, where sales have dropped by 24% in 2023 and are expected to remain stagnant in 2024. Given that China accounts for nearly a quarter of Nissan’s global sales, the prolonged slump is a major concern.
The Chinese auto market is increasingly dominated by domestic electric vehicle (EV) manufacturers, making it harder for Nissan to compete. Analysts suggest that without a strong EV strategy tailored for China, Nissan could continue losing market share in the region.
What’s Next for Nissan?
With the failed Honda merger and financial downgrades, Nissan is left with limited options. Industry experts believe Nissan must accelerate its restructuring efforts and explore new partnerships to stay competitive. Some reports suggest that Foxconn, the Taiwanese electronics giant, may be back in talks for a potential collaboration on EV development, which could help Nissan find a foothold in the growing electric vehicle market.
While Nissan’s liquidity remains strong, its long-term survival depends on how effectively it can navigate global economic uncertainties, revive sales in key markets, and implement cost-cutting measures without further damaging its brand.
For now, Nissan must face the reality of an increasingly grim financial outlook, as investors, employees, and customers await signs of a true turnaround.
