Significant layoffs due to declining performance: Many car companies in Japan and Europe face headwinds.

Recent financial reports shed light on the challenges facing the automotive industry in Japan and Europe. Most of Japan's top automakers saw their net profits fall in the first half of 2024, while a number of auto companies in Europe also announced job cuts and cost-cutting measures, showing the unfavorable situation and outlook for the auto industry in the two regions.

According to the Nihon Keizai Shimbun, Nissan's financial results for the first half of 2024 (April to September) show that the company's net sales fell 1.3 percent year-on-year to 5.98 trillion yen; Operating profit fell sharply by 90.2 per cent year-on-year to Y32.908 billion, while operating margin fell to 0.5 per cent from 5.6 per cent a year earlier. Net profit plunged 93.5 per cent from a year earlier to 19.223bn yen.

In particular, in the second fiscal quarter (July to September), Nissan's net sales were 2.99 trillion yen, down from 3.15 trillion yen in the same period last year; Operating profit was 31.9 billion yen, below market expectations of 65 billion yen, and well below the 208.1 billion yen in the same period last year, down 85 percent. Operating margin fell to 1.1 per cent from 6.6 per cent a year earlier; The net loss was Y9.3bn, compared with a net profit of Y197bn a year earlier.

In light of these conditions, Nissan revised its full-year forecast, cutting its sales forecast from 14 trillion yen to 12.7 trillion yen; The forecast for operating profit was cut from Y500bn to Y150bn. The global sales target was also reduced to 3.4 million vehicles from 3.65 million.

Against this backdrop, Nissan announced that it will reduce global production capacity by 20% and cut 9,000 jobs. "The market environment is very tough," Nissan Chief Executive Makoto Uchida told a news conference. Sales of our core models fell short of expectations." Mr. Uchida announced that he would take responsibility for the poor performance and voluntarily take a 50 percent pay cut.

According to Japanese media reports, hybrid cars are becoming more and more popular in the United States, but Nissan has not launched such models in the U.S. market; In the Chinese market, in the face of fierce competition from electric vehicles, Nissan lacks corresponding countermeasures, leading to a decline in sales. Nissan's global workforce, currently 130,000, will be reduced by about 7 percent. This is the company's second major restructuring of factories and job cuts since 2019, when it announced the closure or downsizing of 14 bases around the world, cutting about 12,500 jobs.

One of the reasons for the poor performance is a long-unchanged operating culture, with the "wait for instructions" culture from top to bottom still entrenched, allowing the company to fail to respond to rapid changes in the industry, leading to the current predicament.

First-half financial results from Japan's seven major automakers have all been released, with Toyota, Honda, Mitsubishi and Mazda all reporting lower net profits compared with the same period last year. Toyota's net profit for the July-September period totaled 573.7 billion yen, down 55 percent from 1.28 trillion yen in the same period last year, due to the fraud scandal and production shutdowns caused by recalls.

In addition to Toyota's fraud scandal, other well-known Japanese automakers such as Honda, Suzuki and Yamaha also broke news of fraud during the same period. In the second quarter of the 2024 fiscal year ended Sept. 30, Honda Motor's operating profit for the quarter was 257.9 billion yen, well below the consensus analyst estimate of 431.1 billion yen.

Several European carmakers have also announced plans to cut jobs or close factories. Analysts see this as a sign that the European auto industry is struggling.

On November 7, the Strangis Group announced that it will lay off 1,100 employees at its Jeep plant in Toledo, Ohio, starting in early 2025, in order to "regain competitive advantage." The group's turnover in North America plunged by 42 percent in the third quarter due to lower sales and promotional activities to reduce vehicle inventory.

According to the German media "Manager magazine" news on the 7th, following the announcement of the closure of the Brussels plant affected 3,000 jobs, Audi also plans to lay off about 4,500 people in Germany.

According to the financial report of the third quarter of 2024 released by the traditional German auto giant Volkswagen Group, the revenue of the third quarter was 78.478 billion euros, down 0.5% year on year; Operating profit of €2.855 billion fell by 41.7% year-on-year to its lowest level in three years. Volkswagen has already announced it will close three factories in Germany and cut tens of thousands of jobs. Volkswagen said it aims to reduce labor costs and ensure its business is sustainable over the longer term.

French tire maker Michelin Group announced on November 5 that it would close its plants in Saule and Vannes in western France with the loss of 1,250 jobs, and also prepare to close two plants in Germany by 2025. Over the past two decades, Michelin's workforce in France has shrunk from more than 30,000 in 2003 to about 18,000 today.

In addition, European auto supply giants such as Bosch, ZF and Valeo have also announced cost-cutting plans. The Bosch Group has announced several job cuts around the world, with the latest action affecting more than 7,000 jobs in Germany, mainly in the automotive supply division. Schaeffler Group, another German auto parts giant, announced on the 5th that it will cut about 4,700 jobs in Europe. Schaeffler's third-quarter operating profit almost halved as the downturn in the European car industry dragged down parts sales.

Japanese automakers are struggling both at home and abroad. Analysts say new product lineups from Japanese automakers are unappealing, and weakening consumer demand for electric vehicles is also a problem.

At Nissan, for example, sales of pure electric vehicles are slowing in North America, while sales of hybrid vehicles, a transition product, are growing. However, Nissan focused on sales of pure electric vehicles and failed to launch hybrids in a timely manner, causing it to become less competitive in the market. James Hong, an analyst at Macquarie Securities Korea, said Nissan needs to review its electric vehicle strategy.

Looking at the European automotive industry, with the increasingly stringent carbon emission standards, traditional European car companies are facing huge pressure to transform. Yet sales of electric cars in Europe continue to weaken. The relevant European industry association has recently issued a warning about the development of the local auto industry. "This is the worst period we have ever seen and the longest period of difficulty," said Benjamin Krieger, secretary general of the European Automotive Suppliers Association, according to French newspaper Le Figaro.

The European Automotive Suppliers Association points out that the European new car market is at a low level and the electrification transition is progressing much more slowly than expected. The auto industry has invested heavily in new technologies, but returns have been too slow. The association called on the European Commission to take measures to strengthen investment in new technologies and lower electricity prices to ensure Europe's competitiveness.