Nissan Motor Co Ltd
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Nissan Motor Co Ltd
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Ladies and gentlemen, it is time. We'd like to start Fiscal Year 2019 Quarter 3 Financial Results Media Conference. Thank you very much for coming despite your very busy schedule. Members of the press, thank you very much for coming.
Now first of all, we'd like to have Mr. Uchida, our CEO, to make his presentation. Mr. Uchida, floor is yours.
Good afternoon. Thank you for joining us for the announcement of Nissan's Third Quarter Earnings for Fiscal Year 2019. Before I begin, please allow me to express our condolences to the families and loved ones of those taken by the coronavirus. I will now outline Nissan's global performance for the first 9 months of fiscal year 2019 and the full year outlook. I will then provide an update on the efforts. Following the presentation, I will be happy to take any questions you may have.
For the 9 months ending December 31, total industry volume weakened in China, Asia and Oceania, including ASEAN, and in India and some countries in Latin America. As a result, global total industry volume fell 5% to 65.3 million units. Nissan sales were stable in China, despite a drop in demand, while our sales in North America and Europe decreased. As a result, Nissan's global sales volumes stood at 3.697 million units, and our global market share was 5.7%.
Our sales performance for the 9-month period in the key markets was as follows: in Japan, we faced a challenging market, negatively impacted by the consumption tax hike and typhoons. As we continue to be affected by an aging portfolio, while competitors are on the new product offensive, Nissan sales decreased 6.9% to 381,000 units. Despite the challenges, demand for the New Dayz, which was introduced last March remains strong. We sold over 70,000 units of the New Dayz in the period. The figure significantly exceeds its full year sales volume in the fiscal year 2018. Nissan is promoting the Nissan Intelligent Mobility strategy. The New Skyline, which features the updated ProPILOT 2.0 technology, has also been well received. In fact, the Nissan Skyline won the best innovation award as part of the 2019-2020 Japan Car of the Year competition. In a challenging China market, where sales decreased, Nissan sales remain stable. And our market share increased 0.6 percentage points to 6.3%. The Sylphy, X-Trail and Qashqai continue to driving sales.
The market remains tough due, in part, to the novel coronavirus outbreak. However, Nissan maintains its focus on steady growth without pushing for artificial volume increase through discounts, which will ensure healthy business operations.
In the United States, Nissan's sales decreased 9.1% to 980,000 units. We are consistently working for better quality of sales. Incentives per unit and dealer inventories are improving. Meanwhile, our products grew less competitive due to an aging portfolio and this led to a decrease in sales. In Europe, we are facing increasingly stringent environmental regulations and shifts in demand towards smaller cars, smaller gasoline engines and electrification. We were delayed in our switch to compact engines for our key models, Qashqai and X-Trail. Our volume was also negatively affected by a temporary sales decrease before the model changeover of the Juke and the changeover from NV200 to new NV250 light commercial vehicles. Nissan sales decreased 16.2% year-on-year.
For the 9-month period, consolidated net revenues totaled JPY 7.507 trillion as a result of our decrease in volume. Operating profit was JPY 54.3 billion and net income was JPY 39.3 billion. We ended the period with an alternative net cash position of JPY 847.5 billion. Our China business remains solid. On the management pro forma basis, which includes the proportionate consolidation of our Chinese joint venture, operating profit was JPY 179.3 billion and alternative net cash was JPY 1.1593 trillion.
Our financial results for the 9 months were as follows: consolidated net revenues totaled JPY 7.507 trillion. Operating profit was JPY 54.3 billion, which equates to an operating margin of 0.9% -- 0.7%. Ordinary profit was JPY 141.4 billion. Net income stood at JPY 39.3 billion.
The slide illustrates the operating profit variance analysis in detail. Foreign exchange fluctuations, regulatory compliance expenses and product enrichments caused in the United States and Europe, and rising commodity prices are putting pressure on the automotive industry. And had a negative impact of JPY 134.9 billion. Our performance was negative, as incentive reductions and cost-cutting efforts only partially offset the negative impact from the decrease in sales. Meanwhile, we continue investing for the future. R&D expenses and other Monozukuri costs had a negative impact.
I will now present the fiscal year 2019 outlook. Nissan remains committed to business transformation and performance recovery. At the same time, we recognize the results the company has delivered so far, economic uncertainties and market slowdowns. Given the current circumstances, Nissan revised its full year guidance for global sales to 5.05 million units, down 3.6% from the previous forecast. Reflecting the latest sales forecast and the results of the 9-month period, we revised our full year forecast as follows: net revenues of JPY 10.2 trillion; operating profit of JPY 85 billion; net income of JPY 65 billion. The forecast is based on the foreign exchange rate assumption of JPY 108 to the U.S. dollar for the fourth quarter and the full fiscal year.
This forecast does not include the potential impact of the novel coronavirus. The forecast -- I will provide an overview of the status of our current operations in China at the beginning of the Q&A session.
Compared to the previous guidance announced in November, the anticipated movements in the operating profit are as follows: considering the latest situation, changes in foreign exchange assumptions are expected to have a positive impact of about JPY 20 billion; lower sales volume is expected to produce a negative impact of JPY 86 billion. Expected decrease in sales for Japan and the U.S. are the main negative contributors.
Last November, we paid an interim dividend of JPY 10 per share. Given the full year earnings and free cash flow outlook, Nissan does not plan to distribute a year-end dividend for fiscal year 2019. The full year dividend will be JPY 10 per share.
Let me express my sincere regret to our shareholders. The company's results are weaker than expected. At the same time, we cannot afford any delay in investments on future technologies and product developments. We decided that this was the right thing to do to ensure the steady growth of Nissan. Nissan is carrying out its business transformation plan to restore profits and attractive shareholder return as soon as possible.
Now, I will provide an update on the business transformation efforts. As you may recall, Nissan is working on 3 pillars of business transformation, namely U.S. business recovery, operational and investment efficiency improvement and steady growth through new products, new technologies and Nissan Intelligent Mobility. In the United States, we continue our efforts to normalize our sales. Net revenue per unit, sales incentives and dealer inventories improved from the prior year.
Our fleet sales progressed to a more appropriate level in the third quarter. Pure retail volume -- well, excuse me, our guests as well as our -- pure retail volume, excluding fleet and retail share of the new Versa that was launched last August as well as our SUVs, in which our strength lies, including the Rogue Sport and Kicks, are starting to pick up. Profits are heading in the right direction. Thanks to our sales effort that do not rely on incentive spending. We are beginning to see the results of our initiatives.
While we are taking similar actions for midsized sedans for which the market is slowing down as well as other aging models, we face decreasing sales and negative impact on profitability. We know we are doing the right thing, and it is critical to remain focused. Yet, it will take time for the U.S. business to recover as we prepare to launch new technologies and products in the market.
Nissan is improving operational investment efficiency toward fiscal year 2022. Rationalization, production capacity and efficiency enhancement of production operations are on the right track. We are redefining the strategic roles of each production plant. The direction is clear. We will provide further updates as we commence the implementation phase. Rationalization of the product lineup is also making progress. We decided to end the sales of the Datsun brand, Indonesia. We continue a strategic focus on technologies, range of models and regions in which our strength lies and optimizing investments. Short-term steps are done. We are making better use of Alliance assets, and selecting and prioritizing upcoming models that will be launched from fiscal year 2022 onward.
As you can see, the business transformation initiatives for fiscal year 2022 onward are on the right track. However, our sales volume and performance are weaker than expected. We are developing additional countermeasures, including acceleration plans and better use of the Alliance and other partnerships for a short-term recovery. Because Nissan is experiencing weak performance, we have to tighten control on fixed costs. We find the situation challenging. That being said, steady growth through new products, new technologies and Nissan Intelligent Mobility is a critical pillar that will determine the company's future. I am confident we can make this a reality. Continuous launches of new products are expected to largely improve the average age of our portfolio around the world from the latter half of fiscal year 2020 onwards. In fiscal year 2020, one of Nissan's core models, a new SUV will be introduced starting from North America. In addition, a compact Sedan and crossover will be launched mainly in emerging markets.
Regarding new technologies, we launched the New Skyline in Japan. The car features ProPILOT 2.0, which enables multi-line highway driving and hands-off driving, while cruising in a given lane. With regards to electrification, a crossover equipped with an updated e-POWER system and an all-new EV that offers an exciting new driving experience are also coming to the market, starting with Japan.
We have more to come in our home market, Japan. On February 25, we are going to unveil the new ROOX super-height wagon, which will be introduced in the kei car segment that accounts for 40% of the Japan market. The new ROOX, like the Dayz is equipped with a system that goes beyond conventional safe driving assistance, ProPILOT driver assistant, technology controls the vehicle with high precision. As for new business areas, the second series of field tests of Easy Ride, a new mobility service using driverless vehicles is underway here, in Japan.
Nissan offers new customer values. We keep on taking on challenges and making breakthrough. This is the car-making DNA that is passed on within Nissan for generations. We will package it into technologies and products, which we will deliver first to customers in our home market, Japan. You can count on us. Given the current performance, we are reviewing milestones up to 2022. We are going to announce a revised plan, including ways to better leverage the Alliance this May. Since I became CEO, I have been listening to feedback from inside and outside the company and started working on the identified challenges. There are 3 of them: one, focus on core competence and develop a stronger financial foundation, specifically, in share selection and prioritization and fix the high cost structure; secondly, better execution and faster implementation, quick decision-making and simplified processes, is how we are going to change the internal process; thirdly, we define and resonate a corporate purpose and reform corporate culture for steady growth. We already made some changes to the internal system and processes to get this done.
As CEO, I am committed and determined to steer Nissan. You can count on Nissan to change for the better.
Thank you very much. We would like to move on to the Q&A session. Before taking your questions, we will make a presentation on the status of China regarding coronavirus. Mr. Uchida, please?
Yes, let me make a presentation on the current status of the production operation in China regarding coronavirus. What I can say today, we are preparing -- depends -- all it depends on the directives from the local authorities, Huadu, Dalian and Zhengzhou Nissan, is preparing to restart production in February 17. And Zhengzhou and Xiangyang plants, at the earliest, will resume the operation from February 20 or onwards. The situation is changing every day. And we are preparing to restart production, while prioritizing the safety and well-being of our employees in China and in full compliance with government directives.
Let me talk about the impact on sales volume and performance. The situation is changing daily, and we do not have clarity on how long it will continue. And I would like to refrain from making a comment of -- on the specific impact. But we would, therefore, like -- but if we think that we cannot resume production until mid-February onwards, so that is why there will be a certain level of impact. And how about the impact on production in Japan, as some media reported Nissan Kyushu and Nissan Shatai plants -- Shonan and Nissan Shatai Kyushu are going to adjust production. In Nissan Kyushu, on the 14th and 17th, we are adjusting the production. In Nissan Shonan and Nissan -- Nissan Shonan and Nissan Kyushu, we'll cancel the working on holidays that we initially planned. In Nissan Kyushu, we'll have an operation day on the 24th of February. We plan to make up for the impact on February production by increasing production in March and onwards. This is what we can say about the impact as of today.
Thank you very much. We would like to invite questions. [Operator Instructions].
TBS TV, my name is [ Umeda ]. This is the second time you are revising the outlook downward. What is the biggest reason behind the second revision that you are making?
Sales volume fell short of our expectation. This is the biggest factor. Having said that, to restore the performance, we are reducing fixed costs. And fixed costs were reduced as we planned. Sales volume fell short of the expectation. And that was the major factor. Therefore, given the current circumstances, we are going to do -- we have already started doing more on the fixed cost control. Whenever the details are clear, as I said, in May, when we announced the revised mid-term plan, I would like to provide an update.
And the second question. Your volume declined more than you expected. But if you look around the auto industry, all the carmakers are producing poor results. But Nissan's performance is particularly poor. You said that you're going to make an update on revised mid-term plan. How are you going to revive your company? To start with, in such tough time, do you have enough competitiveness to endure the stormy times or difficult times? What do you say about this?
In the current situation, we are working for better quality of sales. In many -- all of the regions, we are enhancing the performance per unit. But in mass, this has the negative impact on the sales volume. Therefore, we remain focused on the right direction, and it will take time. Traditionally, we thought that 2019 will be at bottom. And 2020 onwards, we were -- we envisage the picture to grow. However, it will take more time. This is what we see with the given circumstances. But for the future, we will be introducing new models and in core models or key models, Nissan's value per unit is ensured. And with the new products, we are going to ensure a greater Nissan value per unit. If we can do this, we will be able to revive the company. And we have enough power of the individual within the Nissan and the top executives here to steer this and bring forth the capabilities of all the individuals who are working at Nissan.
Okay. Related to that, you are optimizing the business or operations, you said. You said that you're going to provide update on mid-term plan. Restructuring, well, last year, you said that you are going to cut 12,500 jobs. So restructuring or closure of plants, are you thinking about these drastic measures as well?
In the previous occasion -- what we announced on the previous occasion, as I updated earlier, we are making progress. But our sales volume has been weaker, so we have to do more than what we said. Therefore, including the regions, we are specifying, which areas to put particular efforts on and which areas to be revised. That's what we are going to decide speedily and make a decision. Let me give you more examples. The other day, after the Alliance operating Board, we talked about the leader-follower concept. And in regions, we are using a concept of reference to utilize the strength of Alliance to make it contribute to the revenue and profit of each partner company. In other words, as we proceed with the mid-term plan, Nissan will determine its core, where we put efforts in and which area is where we will gain support of the partners and Alliance entities. These are the things that we are going to clarify, and this is the major challenge that we are addressing. And this is how we are going in to address the challenges.
[ Watanabe ] from Nikkan Kogyo Shimbun. 2 questions. First question, fiscal '19, you hit the bottom -- you plan to hit the bottom, you said in your presentation. But fiscal '20, how -- what is the prospect of fiscal 2020? The market is deceleration. And then there is another negative impact regarding the situation. How would you think?
I'm going to answer in the same way, fiscal '19, bearing in mind the current situation. Thinking about fiscal 2020, I think, it will require a little time. So including those elements, in May, we will be reviewing the mid-term business plan, but what I want to say is this. Fiscal 2020, our new models, as I explained, the core models that would be launched in various regions. In that context, quality of sales would be improved. So actual performance plus launch of a new models. So our volume age would be improved. So I'm sure that there are many rooms, where we can improve our quality. We will work steadfastly on it.
Regarding the profit, the current situation must be borne in mind and fiscal 2020, too. Situation may continue a little tough for us, but we will the steer the management of the company. That is how I see as of now. So fiscal 2020, I'm not saying that we are optimistic about fiscal 2020. But how can we bridge to fiscal 2020 in-house that we have done our study and discussion.
And the second question is the additional rationalization measures that you referred. Just to make sure, by May -- or in May, are you going to announce the additional countermeasures, where -- in order to stop the bleeding or you may do it before that?
Depending on the circumstances, we will consider when to update you. But one milestone is May, when you -- we announced the revised mid-term plan. That will be an opportunity. At that time, we will provide you with a specific action plan going forward.
Sean McLain from The Wall Street Journal. I was hoping you could talk a little bit about the third quarter. And why things took such a turn for the worse, causing you to make a loss. What were the primary actors there? And secondly, it seems clear with your negative cash flow that you can't keep this up, that the problem is not so much your plan, it's the fact that -- it's not the quality of sales, it's the fact that you don't have enough sales. Your fixed costs are way too high. So I mean, all this talk about revising this plan, it seems clear, you need some severe cuts to stem the bleeding. How bad is it going to be? Are we talking about massive changes to the -- your footprint with this leader-follower concept? Is it going to change drastically your footprint around the world?
Thank you for your question. Starting with your second part of your question, as you pointed out, we need to reduce fixed costs or, to be more specific, we need to thoroughly cut spending, and that's what we are going to do. On this point, in the -- provided with the current circumstances in Q3, we are specific about what to do, and we have to do more than what we have done. Otherwise, it will be very difficult to improve our profitability. And as I have been saying, Nissan's strength should be specified first, and this is where we concentrate our resources in. And in some cases, in some cases, we may have to give up on some areas. These are the things that we would like to identify, and this is what we are doing today.
Going back to your first question, in the third quarter alone, sales volume impact was the biggest one. We have been working for better quality of sales. And the performance per unit has been better, but overall volume is not recovering. That's how I diagnose what happened in Q3. And frankly speaking, this was weaker than what we expected. Therefore, based on the circumstances of 2019, in order to make a quantum leap in 2020 onwards, including the fixed cost reduction, we have to do more.
[ Kishimoto ] from Toyo Keizai. Relating to the previous question, you answered that there may be some regions that we have to give up on. Now for example, core regions, U.S., China, are they going to be the core regions? Or are there regions like Southeast Asia, which you have to give up on? Can you speak more concretely? That's my first question.
Thank you. What I want to say is this. When I say core regions, as a Nissan brand, are we going to withdraw from some region? No, that's not what I said. So are we going to stop Nissan brand in weak regions? No, that's not what we're going to do. In regions, how -- what is our presence? That is going to be promoted with the partnership with Alliance? Or are we working with partners? That is the key. But if we have to give up on certain areas, going forward, we have to dig deeper into the situation in order to find out the answer to that.
The second question I have regarding dividend. So you're going to have the -- from JPY 57 to a very small number throughout the year. So what do you think of the managerial responsibility about having such a low level of dividend? And in order to clarify managerial responsibility, are you willing to reduce the officers' compensation regarding dividend?
I take it with a great weight, seriously. It is our responsibility as well. So right away, what can we do immediately including some metrics, I cannot say about it. But those points will have to be included in our discussion and examination. Thank you.
Okay. Yes, this person, over there. Yes.
Yes, Nikkei Shimbun, Okada speaking. Between October and December, extraordinary loss was JPY 10 billion, more than other quarters. Is there a restructuring fees included here in these extraordinary losses? These -- if this continues for every quarter, then after next fiscal term, it may be very difficult to improve your profitability. Operating margin for this term is about 1%, including China. Including China, it may be higher, of course. So operating margin slowed down, 1%, 2%. This low level of operating margin will continue in, what, 2021, too -- fiscal year 2021, too? How long will it last? And there's another question that I would like to ask you. Automotive cash flow in the third quarter -- free cash flow was negative. Because operating cash generation is weak. I think this is one big factor behind this. Structural reform, maybe the progress of structural reform is lower-than-expected because you cannot generate cash, you don't have the resources to reform the structure. In carrying out the structural reform, where do you get the funding from? For example, issuing the corporate bonds, borrow money from financial institutions. How are you funding yourself, financing yourself to carry out the reform in the first place?
I cannot give you all the details. But let me move on to the first question. I would like the CFO, Mr. Ma to answer your question, the first one. And the second one, which is about the automotive cash flow, Rakesh Kochhar will make an explanation?
Yes. Hello. Thank you for your question. Yes, you're right. In the extraordinary loss section, we have put some impairments or costs related to restructuring that has already been announced throughout the year. And as we decide and announce these restructuring, we will book it in the extraordinary costs. So, so far, I think, in Q3, we've booked about JPY 10 billion more, in Q3 alone. So as things are moving on, we will book as they are decided. Okay? Thank you. And Rakesh will explain the free cash flow and funding.
Thank you, Stephen. Thank you for the question. So yes, the free cash flow is negative for the first 3 quarters. And you also said in the third quarter, it's very normal to have a negative free cash flow in the third quarter because we are building inventory for a big sale in the fourth quarter. If you look at the details of the free cash flow for the first 9 months, a big piece of negative is coming from basically ARAP, receivables and payables, simply because as our sales are less, our production is less. When the production is less, the payables would be less. When we finished the year, we expect a much better total free cash flow number than what you see today. So fourth quarter is going to be positive.
And then you said, how are we funding ourselves? Of course, free cash flow is one of the means through which we fund. I mean this is 1 year in which we have a negative free cash flow. Normally, we have had very good positive free cash flow. So we have cash available. We have enough liquidity in the automotive business, in the sales finance business, to take care of the restructuring. And of course, we have confidence of our lenders. If we need to borrow more money, we can do so. And at the right time, we will also issue financial bonds. And just as a clarification, we have a large sales finance business. We have been issuing financial bonds, bank loans, we have been able to fund ourselves. So I don't think liquidity is an issue. Free cash flow is an issue in the year. And with the actions that management is taking in the next few years, it would be good. And the fourth quarter, as I said, is going to be solidly positive free cash flow. Thank you.
Thank you, Rakesh. Did that answer your question, sir?
Yes. This side, Hans-san.
Hans Greimel, from Automotive News. I'd like to ask 2 questions. One is about the U.S. situation. Your sales are deteriorating rapidly there, and your dealers are not satisfied with the situation. Can you give us maybe the top 3 concrete actions that you're doing in the United States to improve the business there? And is it not the case that maybe you are rushing too fast or cutting too hard in the United States to sacrificing too much volume there? And the other question I had is just a clarification on when you think overall earnings at the parent company will hit bottom. Is that in this current fiscal year, and they will start improving next year? Or will it keep going down next year to a lower level?
Thank you. Overall, directionality, I will respond. And regarding details, I will ask our COO, Ashwani Gupta, Gupta-san. North America, as you said, quality of sales, per unit quality sales, it is on track. It is proceeding as planned. Fleet level is turning into an appropriate level. But in this context, the aged portfolio is impacting negatively. And it is impacting very seriously into the sales volume. That's the current situation. But we are not wrong in terms of our directionality. So regarding core models, we will follow the direction that we set forward. Now the dealers, our corporate partners, we will have to strengthen the engagement with them. So regarding new models in various ways, we will be introducing new measures, mainly in North American market. By doing so, in North America, Nissan car value -- value of our cars that could be enhanced. And the North American team will proceed with that.
Now then when are we going back to the profit in the North American situation? More than we expected, we may have to spend more time right here. So this year and next year, immediately, are we going to see the improvement of the levels? Under the COO, we are having a good discussion. We will have to spend a little more time solidly, so that we can solidly enhance the value that we can achieve in North American market. Gupta-san -- Ashwani-san, anything to add?
Thank you for the question. We saw the TIV, which went down by 1.6% in the United States. We think it will be 20.2 million, whereas our market share went down by 1%, visibility of 8.2%. You asked the question. Yes, we know what exactly the problem is? You said, I should point it out with 3 main problems: number one is, we have changed the way we do business in U.S. from quantity of sales to quality of sales. Of course, there is a transition when we go from quantity of sales to quality of sales, and which is taking time, number one, in a saturated or a declining TIV; the second issue, which we have is, our average product lineup is roughly 5.2 years, which is higher than our competitors who are running between 2.5 years to 4 years. We have a remedy for it? Answer is yes. In next 2 years, we are going to launch 8 models in United States, which will bring down our average product line of age from 5.2 to roughly between 3 and 3.5. And this is the second problem, and this is a second countermeasure, which we are taking; the third one, of course, I read in the automotive journal, something related to our dealer engagement. I can ensure you that the dealers are fully engaged, and they are supporting us towards this transition from quantity of sales to quality of sales. Quantity of sales happened when TIV was growing and quality of sales is happening when TIV is going down. Obviously, the challenge is high, and we are working hands in hand. Tomorrow, we will have another business scheme with our partners, which we are talking to them. And in April, in New York motor show, I will be personally going to New York motor show for the product review and detailed discussion with our dealers to how to move forward. So with these 3 concrete problems and the 3 concrete countermeasures, we are confident that U.S., we will come back. Thank you.
Thank you. So yes, over there.
NewsPicks, [ Kei Roshi ] is speaking. I have a couple of questions. The first question, as you carry out the reform that you referred to, well, you -- Seki-san has already left, and how does it impact your performance? And with regards to China, TIV is very slow. In 2020, we cannot expect a big boost in the market in China. So EV subsidies will be reduced. So how are you going to revise the overall operation in these circumstances? Are you going to take more measures, like U.S.?
Starting with the first question. Seki-san who used to be responsible PRV, and he left the company. But this was because of personal reasons. And Seki-san's plan is already in the implementation phase. So in the implementation phase, all the Executive Committee members and MC Chairman, Management Committee Chairman, are driving the implementation already. And in -- for the steady growth going forward to get -- myself, CEO, Gupta-san and Easy members will work together to specify the core competence that I referred to. We will specify the core competence and put efforts. Therefore, is there any impact from the departure of Mr. Seki? It did, but our direction remains unchanged.
And the second one, which is about China. China market, as we have seen last year, remains tough. There was an impact of coronavirus and things remain uncertain. But Dongfeng Nissan or -- including Dongfeng Group, in the joint venture in China, our car models are enjoying big share in all the regions. So the question is, how much we can provide customer value with the key models? Because we have a big presence in -- by area, we need to share the best practices and benchmark and enhance the overall performance across the nation. That's what we can do in the Chinese operation. But to -- don't take me wrong. In terms of volume, we will be impacted by the demand. While the volume is falling -- while the market is slowing down, we are not pushing sales artificially in China. We are always looking for quality of sales and providing customer value through our products. That's what we are realizing in China.
And talking about EV. EV market in China, thanks -- because of the incentive card, it's becoming though. All the carmakers are facing difficulties, I believe. But in SUVs, probably China market, EV demand among retail customers will rise eventually. So existing strength of Nissan will be utilized. And when there is a good timing, we will introduce models in China. If we do this, our presence in the electrified vehicles market in China will be developed. And that's what we are trying to do.
Time is coming to a close. So this will be the last question. The person in the middle, please.
Tomoda from Asahi Shimbun Newspaper Company. I have 2 questions. First of all, about China. Domestic production there is impacted because of the novel coronavirus. But look -- how do you analyze the current situation of supply chain regarding domestic production, of course, you cannot warrant any of domestic estimates? Second question, this may sound a repetitive question. New models will be launched in a full-fledged manner. Corporate-wide, the overall performance will be improved because of the input of new models. When will be the time line? Next fiscal year?
Well, it may be lower than this year or last year. Regarding your second question, I'd like to answer first. As I said earlier on, still, we believe we need time. And in this context, we have to work steadily, and we have to strengthen the zones where we have to strengthen and that will bridge into our future. The final budget for 2020, budget formulation has not been completed yet. So solidly and steadfastly taking a good amount of time we want to discuss. Within the Nissan, we have various challenges, so to the extent possible, in fiscal '19, we will bring out everything and then from that basis, we will formulate the plan for the future. This is to the extent that, I can say, at this juncture.
Now your first question, was it about China? The impact to the domestic production. As you know, when it comes to the logistics and supply chain within China, we know that the situation is changing daily. So already impact may have appeared as risks in a major way. On the other hand, the alternative parts and supplementary parts and components, we have a plan and we have put into implementation. We try to recover, I say, recover. Going forward, logistics could be impacted furthermore and predicating on that we will have a plan so that there are no more risks into our domestic production. In daily conference, the local people are coming into the discussion, and they are steering their general course.
Thank you very much. Now ladies and gentlemen, time is up. With this, I'd like to announce the completion of the press conference. Thank you very much.
Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]