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As we make our way through the second half of 2015, Nissan has much to be excited about from a sales standpoint regarding its mid-size Altima model. With nearly 206,000 deliveries through July, the Altima has a 15,631 unit sales lead over the Honda Accord after a 17,244 unit sales deficit just a year ago. The Nissan Altima’s 1.4% year-over-year sales improvement puts the model squarely in second place within the mid-size car segment. Now behind the Toyota Camry, Nissan sedan finally surpassed the Accord, which had sold more often than the Altima for years. Notably, the Accord’s 14% sales drop versus last year contributed to its current third place status. After taking a deeper look into the factors with the greatest effect on these sales trends, it appears the Altima’s sales performance is not as great as it seems at face value.

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From an inventory standpoint, the Altima’s days’ supply fell between the Camry and Accord both this year and last year, but was down a sizable 16 days in July compared to a year ago. In fact, the Altima’s current days’ supply of 47 days was much lower than the industry average of 58 days and was only six days higher than the Camry. Thus, it appears there is considerable demand for the Altima relative to its production volume. The question is, “Why is the Altima doing so well when demand for mid-size cars — in general — has been soft?”

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Registration data from R.L. Polk revealed that Honda continued to do (essentially) zero fleet business, while the Altima’s rental penetration climbed to 26% of the model’s total sales through June. Nissan clearly relies on rental business more heavily than either of its two Japanese rivals. Despite the bump in rental deliveries, the Altima still has a lot of catching up to do if it plans to overtake the segment leader, Camry. Even though 20% of Camry registrations are tied to rental companies, Toyota’s mid-size model has 41,518 more registrations than the Altima during the first half of the year, which is roughly the equivalent to the Camry’s entire rental volume. Therefore, even if Toyota completely ceased selling the Camry to rental companies, it would still be neck-and-neck with Nissan.

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After identifying how much of the Altima’s sales success this year has to do with its comparatively high fleet volume, we must analyze how retail demand has changed as a result of incentive spending. After conducting an analysis of average incentive spending per unit through July between the last two model years, we see that while Toyota and Honda have dialed back spending for their respective models, Nissan has boosted incentives on its Altima by a whopping 29%. The maker’s spending spree has only worsened as the year progressed; last month the company spent over $4,800 per unit on Altima discounts, while its two Japanese counterparts spent less than $3,000 per unit on their mid-size cars. These findings indicate that instead of natural demand for the Altima increasing significantly, Nissan effectively “bought” sales by drastically lowering prices.

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As can be seen in the chart above, the Accord, Altima, and Camry have experienced a drop in one-year retention year-over-year. The Altima’s performance is worst of all, however. Even though the Accord and Camry exhibit lower retention figures in 2015, their respective scores are still higher than Altima’s retention of 70.5% last year. On a rolling 3 month basis, retained value for a 2015 Nissan Altima currently stands at 66.8%, or 3.7-percentage points lower than last year’s figure. While demand for used mid-size cars — in general — has been soft, a significant portion of the Altima’s poor retention performance can be attributed to the automaker’s drastic hike in incentive spending.

Of course, there is nothing wrong with selling more vehicles. With regards to its sales achievements, Nissan definitely should be proud. Nevertheless, its current success story is not without warts.  Should the automaker maintain its current strategy of selling more units through rental channels and heavily utilizing incentives to drive retail sales, Altima retention will erode even further. Considering how 19% of the 2015 Altima’s total sales year-to-date came from personal leases — less than both the Accord and Camry — perhaps Nissan does not view retention to be as important as its competitors. Either way, lower retained value will make it more difficult — and more costly — for Nissan to compete on the leasing front moving forward. Quite simply, it means a car buyer’s monthly payments will be higher unless the brand offers to subsidize the lease by use of incentives.

If Nissan’s focus is solely on selling as many Altimas as possible to beat out Honda, it is doing a fantastic job. However, American Honda executive vice president, John Mendel, doesn’t want to hear about it, as the two automakers attain their sales in vastly different ways.