While car shoppers are grappling with high auto prices, Nissan is turning to a pricing strategy that might help.
Reports from Automotive News indicate that Nissan dealers are grappling with at least three months’ worth of stock at current sales rates. This exceeds the national average by over 30% and surpasses any other full-line automaker selling in the U.S.
A dealer memo obtained by Automotive News states that Nissan’s latest concession to dealers is allowing them to advertise prices below invoice.
The dealerships can promote prices up to 10% below invoice for most 2024 vehicles. The Armada can be marked down up to 15%.
Automakers cannot dictate dealers to sell above or below a certain price, but they can impose restrictions on how their products are advertised.
The ability to advertise prices below invoice presents a favorable opportunity for buyers to explore potential savings without visiting a dealership, provided that dealers leverage this newfound flexibility.
Dealer Concerns
Dealers have raised two primary concerns about this pricing opportunity.
Financial Burden
Selling below invoice means that dealers bear the financial burden of the price reductions, not Nissan.
Dealers prefer incentives and rebates that are funded by Nissan, but the automaker is reluctant to revert to offering cash incentives to drive sales. Nissan is trying to avoid repeating the pre-pandemic era when stale models and an over-reliance on rebates to meet sales targets impacted brand equity and strained the company’s financial health
For now, despite introducing better products, Nissan seeks to avoid repeating the same missteps. The company’s 2023 financial year, which ended in March 2024, yielded mostly positive results: sales increased by nearly 20% for the financial year, and quarterly sales (Q4 of the 2023 fiscal year, Q1 of the 2024 calendar year) rose by nearly 13% across all regions except China.
While a small decrease of less than 5% in quarterly profits might be a point of concern for Nissan, the overall numbers suggest a positive trajectory.
CEO Makoto Uchida wants to growth “step by step with a balanced product portfolio and by implementing optimal business strategies.” New marketing initiatives are part of the business strategies, it’s possible Nissan wants to see how better advertising gooses sales before resorting to old ways.
During its end-of-quarter analyst call, the automaker said it expects the U.S. to be a big part of the profit-growth puzzle for the 2024 financial year as China-market sales take a dip. Harder to make that work if Nissan’s paying for incentive and rebate programs, which can run into the hundreds of millions.
Already Selling Below Invoice
The second complaint among some dealers is that they’re already selling below invoice. Others don’t care, happy to be given more freedom to advertise their way out of bountiful inventory and elevated floorplan insurance costs, even if the cost is being transferred to the dealer’s bottom line instead of Nissan’s.
But talk about history repeating: When Wards Auto wrote in 2007 about selling below invoice becoming a common occurrence, it noted that the practice can encourage tactics that sour the customer experience, dealers even more intent on upselling to recover their margins.
AutoNews mentioned the same, writing that dealers could tie below-invoice pricing to in-house financing, or run a below-invoice ad for a model without certain features, then, when the customer shows up and wants those features, steer the customer to a more expensive model at or above invoice.
Wards also wrote about how the tactic enhances competition among dealers of the same brand, AN makes the same point, writing, “Removing restrictions on pricing could also exacerbate the intrabrand competition that has sapped Nissan dealer profitability and damaged consumer perception in the past.”
