Did The Nissan Kicks Cannibalize The Rogue SUV, Or Did It Add To Sales?

|
About: Nissan Motor Co., Ltd. ADR (NSANY)
by: Anton Wahlman
Summary

Does the introduction of a new subcompact SUV add to a brand’s sales, or cannibalize from other SUVs what the brand has to offer?

I take the example of the Nissan Kicks, which was launched in June 2018 to replace the Juke. Did its 4,000 a month cannibalize the Rogue SUV’s sales numbers?

Turns out, the question can’t be answered with an acceptable degree of confidence, because Nissan does not break out the smaller Rogue version in its statistics.

The Kicks is running at approximately 11% of the Rogue’s sales, but could have impacted the Rogue Sport a lot more - if we knew what the Sport sales were.

In any case, it looks like Nissan may have still benefited from the Kicks sales, as the Rogue sales may have been weaker in late 2018 in any case.

SUVs, even in their very smallest and “lightest” forms, are all the rage now. While SUVs used to be large, off-road worthy, and naturally including all-wheel drive (AWD), those constraints are now completely out the window. It’s OK for an SUV to be basically like a lifted hatchback, and with front-wheel drive (FWD) only.

Hence, the Nissan (OTCPK:NSANY) Kicks: here.

Nissan had a poorly performing Juke subcompact SUV, which sold only 10,157 units in the U.S. in 2017, down 48% from 2016. It was too small on the inside, looked way too weird, and cost too much in part because it had a relatively powerful engine for its size, which customers didn’t care much about.

Yet, Nissan needed something to fit below the Rogue Sport SUV, that was more practical and cost less money than the poorly performing Juke. It decided to forego that very powerful engine, and instead focus on offering the largest possible interior, in a fuel-efficient package, for as little money as possible.

How little money? $19,585, that’s how little. Yes, that includes the $1,045 delivery charge too: here.

From the business side of things, we have to see how the Kicks, which commenced U.S. deliveries in June 2018, impacted Nissan’s sales of the adjacent SUVs (smaller and larger). Let’s compare side by side with the larger Rogue and the outgoing Juke, which Nissan clearly started phasing out of the U.S. market by the end of 2017:

US 2018

Kicks

Rogue

Juke

January

0

36184

190

February

0

38119

124

March

0

42151

142

April

0

23331

83

May

0

38413

72

June

563

37004

41

July

2375

26535

26

August

3876

33400

13

September

3498

34842

24

October

3264

27748

7

November

4032

31860

4

TOTAL

17608

369587

726

As you can see in the table above, it was clear that already going into 2018, the Juke had reached an insignificant amount of U.S. sales - under 200 units per month. However, the Rogue is Nissan’s best seller in the U.S., and it maintained that position throughout the period of analysis.

The table does make it clear that Nissan’s monthly U.S. Rogue number is all over the map. Some months, it’s more than 42,000, and then some other months it’s below 24,000. That’s a very wide set of monthly swings up and down.

To put that in perspective, let’s compare just the Kicks and the Rogue as a ratio - starting with the first month during which the Kicks achieved its U.S. sales “cruising altitude” - August 2018:

US 2018

Kicks

Rogue

Kicks %

August

3876

33400

12%

September

3498

34842

10%

October

3264

27748

12%

November

4032

31860

13%

TOTAL

14670

127850

11%

As you can see in the table above, this ratio has been running relatively steady, around 11%. That tells us that the wide swings in Rogue sales are at least directionally correlated with Juke sales, as early as it may be to draw the firmest of statistical correlations.

There's one weakness in this analysis, and it’s hidden under the surface for the casual observer. I’m talking about the Rogue vs. the Rogue Sport. When Nissan started selling the Rogue Sport in the U.S. in the second quarter of 2017, it included it into the overall Rogue sales number. It did not break out the Rogue vs the Rogue Sport.

What’s the big deal, you might ask? Well, if we are going to try to figure out to what extent the Kicks has been cannibalizing the Rogue, it matters greatly if we study the Rogue vs. the Rogue Sport sales numbers. You see, the Rogue Sport isn’t some Sport package of the Rogue. It’s a completely different car (crossover SUV).

The Rogue Sport is shorter and lower than the Rogue. It's not materially narrower, but it’s so much shorter and lower that it ought not be counted as being the same car at all.

This in turn matters when studying the impact of Kicks sales, because a Kicks buyer is far more likely to be cross-shopping the Rogue Sport than the Rogue. Unlike a brand-new powertrain category such as electric cars, when you are buying a budget SUV, the segmentation is very rigid. Buyers of this type of car are unlikely to deviate more than one class (size and price).

Therefore, the introduction of the Kicks may have cannibalized Rogue Sport sales. It would not have cannibalized Rogue sales.

Without Nissan breaking out Rogue vs. Rogue Sport sales, we cannot know the cannibalizing impact of the Kicks. Combining Rogue (which should have the vast majority of sales) and Rogue Sport (which ought to be the small minority) into one category simply creates too much “noise” in the combined number to draw any conclusions from the Kicks running at 11% of the total Rogue number.

This uncertainty is further exacerbated by the Rogue category fluctuating so much from month to month - from under 24,000 to over 42,000 - in relation to the Kicks running at or just under 4,000 per month. Did the Kicks cannibalize the Rogue Sport or not? We simply can’t see below the overall Rogue category surface.

As such, our conclusion must be slightly milder, although yet of interest: The Kicks was introduced into the market where the Juke had failed. It's selling at a rate of 11% of the total Rogue plus Rogue Sport total, which "may" have included some cannibalization from the Rogue Sport. However, it may just as well have been substantially all incremental sales - either from other brands, or from other (sedan) Nissan nameplates, such as Sentra, which is the most obvious one from a pricing perspective.

We know that car reviewers were (are) very positive about the Nissan Kicks as a product. I know it from my own perspective, as I thought the product was a home run, following a one-day test drive. The Kicks drives very well, is extremely practical, and includes as much equipment and features for the price as anything I have seen in the market today. But, at an annualized U.S. sales rate of just under 50,000, has the Kicks been a commercial sales success as well?

The yardstick is not obvious, but the data remains relatively inconclusive. I think that what matters more than anything is this: Where would Nissan’s U.S. business be now, at the end of 2018, without the Kicks subcompact crossover-SUV? (Some would call it “CUV” for crossover-UV.)

To that question, I think the answer is clearer: Nissan is way better off having launched the Kicks in the U.S. Its sales numbers just may not - yet - have reached the highest hopes from the June 2018 launch. In my opinion, Nissan should have no regrets. History will judge this launch positively, even in the sales and accounting departments.

Disclosure: I am/we are short TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article for publication, the author was short TSLA. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers. Nissan hosted a product drive intro event.