The continued rise in the value of the yen makes profiting from international business increasingly difficult for many Japanese companies. Nissan Motor Co. is one of these, and as Automotive News reports, the unprofitable currency exchange rate has prompted the automaker to pull production of Infiniti vehicles out of Japan completely.
Moving Infiniti production elsewhere
Nissan CEO Carlos Ghosn confirmed that the status of Infiniti production won’t be up in the air for long.
“You won’t have to wait a long time before we make a decision about the new base for sourcing of Infiniti,” Ghosn told reporters at the New York International Auto Show “If you follow our logic, we should make the cars where we sell them.”
All Infiniti models but one – the new Infiniti JX35 crossover – is exported from Japan. The JX35 luxury crossover will be assembled at Nissan’s plant in Tennessee. According to Ghosn, locations in North America and China are currently under consideration for additional Infiniti production sites. Earlier this year, Nissan announced that it will build a $2 billion assembly plant in Aguascalientes, Mexico. Which vehicle models Nissan will produce at the Mexican plant have not been specified yet.
Cutting into export profits
As of Wednesday, $1 U.S. bought 82.36 yen in trading. Even though that is below recent highs, the yen’s relative strength has cut into Japanese automakers’ export earnings significantly. The cost of exporting cars becomes prohibitive, prompting automakers to make decisions similar to Nissan. Output has to be moved overseas.
Nissan’s goal with the Infiniti was to capture 10 percent of global luxury sales. The high value of the yen has proven to be a rather large speed bump between Nissan and its goal, admitted Ghosn.
“Infiniti is not sold in Japan,” he noted. “So this is an interesting case where you have most of the sourcing in Japan, none of the sales in Japan. And today, having the sourcing in Japan with the yen is obviously not the right system. So we’re going to be moving Infiniti out of Japan in order to give it a little bit more competitiveness.”
Hot Chinese market and diversity concerns
Sales numbers out of China in 2011 were particularly rosy for Infiniti, notes Automotive News. Sales for the luxury sedan rose 61 percent, which is in large part why Infiniti’s global operations headquarters are being moved from Japan to Hong Kong.
German automakers like BMW have successfully diversified operations around the globe, and Ghosn wants to see Nissan accomplish something similar with Infiniti, calling it “a smart move.”
“We’re seeing what the Germans are doing,” he said. “The Germans are diversifying their base, and they are producing practically everywhere.”
Sales of Infiniti vehicles in the U.S. are down 6 percent in 2012 so far, despite the relative success of the JX line.
Japan sending business overseas because of the yen