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Is NSANY Stock Worth Buying After Battery Supply Deal With SK On?
NSANYNissan Motor(NSANY) ZACKS·2025-03-20 15:35

Group 1: Battery Supply Agreement - Nissan Motor has signed a 661millionbatterysupplydealwithSKOn,securingaccesstoapproximately100GWhofU.S.−madeEVbatteriesfrom2028to2033,sufficientforaround1millionmidsizeelectricmodels[1]−ThisagreementmarksSKOn′sfirstcollaborationwithaJapaneseautomaker,enhancingitsroleintheEVsupplychainwithaprojectedU.S.productioncapacityexceeding180GWhannually[2]−Thehigh−performance,high−nickelbatteriesfromSKOnareexpectedtoimprovetherangeandefficiencyofNissan′supcomingelectricvehicles,whichinclude30newmodelsoverthenextthreeyears[3]Group2:FinancialPerformanceandChallenges−Nissan′soperatingprofitforthefirstninemonthsendingDecember31,2024,fell87661 million battery supply deal with SK On, securing access to approximately 100 GWh of U.S.-made EV batteries from 2028 to 2033, sufficient for around 1 million midsize electric models [1] - This agreement marks SK On's first collaboration with a Japanese automaker, enhancing its role in the EV supply chain with a projected U.S. production capacity exceeding 180 GWh annually [2] - The high-performance, high-nickel batteries from SK On are expected to improve the range and efficiency of Nissan's upcoming electric vehicles, which include 30 new models over the next three years [3] Group 2: Financial Performance and Challenges - Nissan's operating profit for the first nine months ending December 31, 2024, fell 87% to 64 billion yen, with a reduced operating margin of 0.7%, down 4.5 percentage points year-over-year [5] - The company has faced declining sales in key markets like the U.S. and China, struggling against competition from larger rivals and emerging EV makers, leading to aggressive discounts that erode profit margins [6] - Nissan is burdened with significant debt, resulting in downgrades to junk status by major credit rating agencies, which limits its investment flexibility [7] Group 3: Leadership and Strategic Initiatives - CEO Makoto Uchida is under pressure due to the company's performance, with calls for his resignation and failed merger negotiations with Honda [8] - Nissan has initiated a cost-cutting plan under "The Arc" strategy, aiming to reduce costs by approximately 400 billion yen (2.6 billion) by fiscal 2026 through factory closures and labor cost reductions [9] - The company aims to lower its break-even sales point from 3.1 million units to 2.5 million units while targeting a stable 4% operating margin [10] Group 4: Market Outlook - Despite the positive step of securing a battery supply deal, Nissan's current financial struggles and competitive disadvantages in the EV market pose significant challenges [18] - The company's restructuring efforts may improve profitability over time, but it remains vulnerable with high debt and weak margins, leading to a recommendation to hold NSANY stock for now [19]