Nissan Motor stated on Wednesday it would stop producing automobiles in Indonesia, consolidating its worldwide production in the face of declining sales which have pummeled its profitability.
The decision to stop production at the West Java plant, which made its struggling Datsun compact cars, was part of a strategy for “rightsizing, production optimization and reorganizing of business operations,” Nissan said.
Nissan has warned that production cuts, which would lead to plant closures, would be required to accelerate cost-cutting and rebuild profits. The 86-year-old Japanese giant published its first quarterly net loss in almost a decade last month and cut its annual profit forecast.
Years of heavy discounting on its vehicles to increase market share tarnished the brand’s image and sent sales into a freefall, and pressure is increasing on Nissan and its new CEO Makoto Uchida to deliver a sustainable recovery plan in May.
The automaker is having a hard time since the arrest and elimination of long-time leader Carlos Ghosn in 2018, and is attempting to rebuild its partnership with France’s Renault.
The automaker suggested it could leverage partner Mitsubishi Motor’s plants to maintain a automaking presence in Indonesia, but the move to end its own production opens the door for competitors such as Toyota Motor and Honda Motor to build on their dominance in the nation.
Market leader Toyota runs two plants in Indonesia, producing Toyota branded vehicles and Daihatsu compact cars which together have a market share of over 40% of the country’s auto sales. Honda produces cars and motorcycles as well in the country.
Nissan’s exit could also benefit Hyundai, which announced last year that it would build a new factory in Indonesia, its first car plant in Southeast Asia as the South Korean automaker prepares to take on its Japanese competitors in the region.