Nissan's Electric Comeback Stalled By Ariya Production Woes

Nissan Motor Co's new Ariya electric vehicle has been hampered by problems at its high-tech production line, four people familiar with the matter said, slowing delivery of a car designed to put the automaker on the road to a comeback.

Unveiled in 2020 to strong reviews, the crossover was Nissan's first all-new global car in five years and signalled an intent to turn the corner on the turmoil that followed the ouster of former head Carlos Ghosn.

But production is running at least a third below plan, keeping the Ariya from shipping to new customers, according to three of the people and production planning notes reviewed by Reuters. All of the people declined to be identified because the matter is private.

The shortfall represents a lost opportunity to capitalise on the Ariya's buzz and test demand for the first of 19 new EVs Nissan plans to roll out by 2030. It also hinders the automaker's plans for growth in the electric car market it helped pioneer before ceding dominance to Tesla Inc.

Ariya production has been slowed by problems with the highly automated "intelligent factory" manufacturing system it built for the model at its plant in Tochigi, north of Tokyo, two of the people said.

Nissan designed a system that would allow it to produce cars with different powertrains - batteries, hybrids and internal combustion engines - on the same line.

Implementation has proved "an extremely, extremely high challenge" and the advanced paint line has become a persistent headache, one of the people said.

Nissan also faces shortages of plating for an electronic component for the Ariya after a fire at China-based supplier Wuxi Welnew Micro-Electronic in January, one of the people said. The supplier told Reuters it had shifted output to a second plant and was "working to recover production."

In a statement to Reuters, Nissan said Ariya production had faced challenges including supply of semiconductors, disruptions in components shipments and the factory's paint line. "Nissan is making a full and diligent effort to fully regain production capacity at the plant," the company said.

S&P Global Ratings this week cut Nissan's debt rating to junk status, saying margins and sales volumes were unlikely to improve as quickly as previously expected.

NO RESERVATIONS

The production challenges come as Nissan and France's Renault SA in January agreed to overhaul their two-decade-old alliance on more equal footing. Nissan also agreed to invest in Renault's new EV business.

The Japanese automaker rode a wave of early interest in EVs with the Leaf hatchback in 2010. But by 2020 that car was overtaken by Tesla's Model 3 in terms of lifetime sales. EVs accounted for just 4.5% of Nissan's global sales of 3.2 million vehicles in 2022.

Nissan has targeted production of 400 Ariyas a day, according to two of the people, equivalent to almost 9,000 vehicles a month and more than 100,000 a year.

Output over the next two months is expected to fall short of that, according to production planning notes from last month reviewed by Reuters. Output in March was forecast at under 6,900 vehicles and at around 5,200 in April and 5,400 in May, according to the planning notes. That has since been lowered, one of the people said.

Nissan did not comment on production targets or current output.

U.S. dealers stopped taking customer reservations last year, while Japanese dealers stopped taking orders in August.

The Ariya was supposed to hit showrooms in 2021, but that was pushed back to 2022 because of a global chip shortage.

Dublin Nissan in northern California has one Ariya for test drives, but it is not for sale, said general manager Mario Beltran. The dealership is waiting for more that could arrive this spring, he said.

"Just like the Beetle brought Volkswagen back, I think the Ariya will bring Nissan back," Beltran said, adding some customers had cancelled Tesla deposits for the Ariya.

The car has won praise for a bold exterior and a sleek interior with lights inspired by Japanese lanterns.

With a starting price of about $43,000 in the United States, the Ariya is an alternative to Tesla's Model Y, which costs about $4,300 more after recent price cuts and U.S. incentives. The Ariya qualifies for a U.S. credit of $7,500 paid to Nissan's finance company when leased.

'INTELLIGENT FACTORY'

The Ariya line was built with an initial investment of 33 billion yen ($243 million) as part of the "intelligent factory" initiative that Nissan says represents a completely new production system with robotics and a zero-emission pledge.

The new paint line was designed to paint an entire car, including body and bumpers, together, to boost efficiency and be more environmentally friendly.

Nissan has also invested in a new assembly technique that allows different powertrains to be lifted from underneath before robotic installation, saving time.

The new system uses an automated pallet to mount a pre-assembled powertrain.

(Reporting by Norihiko Shirouzu, Maki Shiraki and David Dolan; Additional reporting by Daniel Leussink in Tokyo and Ben Klayman in Detroit; Editing by Kevin Krolicki and Jamie Freed)