FOR REFERENCE ONLY

NISSAN 180 Update and Review of FY 2004 First Half

Press conference

October 29, 2004

Carlos Ghosn, President & CEO, Nissan Motor Co., Ltd.

Today, in the final year of NISSAN 180, I am pleased to report that Nissan continues on a steady course of value creation and sustainable profitability.For the first half of fiscal year 2004, our revenue is up 12.7% and our operating profit reached 403.4 billion yen.

Our first-half performance has been steady, but it has not been easy.At the beginning of this fiscal year, I mentioned some of the risks that we might have to face – risks such as increased incentive battles, rising commodity prices and higher interest rates.All those risks have materialized, sometimes to degrees beyond what we anticipated.But we have been able to absorb their effects as well as the negative impact coming from unfavorable movements in exchange rates that we had forecasted at the beginning of the year.

In this particularly challenging environment, Nissan is consistently moving forward in the right direction, and the performance I will review today affirms our progress.

I will start with a global business and sales review of the first half before giving you an analysis of our financial results.Before concluding, I will share with you our outlook for the second half of the year.

The recap of major events and developments from each region starts with Japan.In September, Nissan broke the mold by introducing six new models at once at our SHIFT_ event.The first three models – the Murano, the Tiida and the Fuga – are off to a good start.And, as I close my remarks today, it will be my pleasure to introduce the fourth new model for Japan, the Tiida Latio.

In North America, we announced a further expansion of our engine assembly plant in Decherd, Tennessee.And we began production of our Altima sedan at the Canton, Mississippi plant.The Canton Plant completed a commitment that many thought impossible, producing five all-new models in just eight months’ time.Together with our Smyrna Plant and our two Mexican factories, our North American plants now have the capacity to support our sales growth competitively.

In Europe, we signed an agreement that will improve the productivity and flexibility of our plant in Barcelona, Spain, where we announced an investment to produce the Pathfinder and our next-generation pickup truck.In Russia, our new national sales company, which began operations on January 1, saw our sales more than double in the first half, to 10,000 units.

In General Overseas Markets, we announced several strategic investments that will increase our presence in key markets.In June we announced our investment of up to $100 million by 2010 to establish Egypt as an automotive industrial base for the Middle East and North African regions.The following week, we unveiled our business plan for Thailand, where we will invest more than $250 million over the next five years to broaden our lineup, expand production capacity and establish Thailand as an Asian export base.Also during the first half, we expanded the Infiniti luxury brand outside the borders of North America, establishing Infiniti in Seoul, Korea.

Finally, in China, we started production of the Teana at the new Xiangfan passenger vehicle plant, and the new Guangzhou Huadu plant, where the Sunny and Bluebird are built, started production.Also in Guangzhou City, we announced our investment of 330 million yuan to set up an R&D facility that we will run jointly with Dongfeng to develop models that will meet the needs of our customers in China.

In every region, you can view each one of these actions and investments as building blocks to ensure our future.Growth is not accidental; it is something that must be boldly planned, thoughtfully prepared and firmly executed.With each one of these decisions, we are systematically laying a foundation for creating more value and profitable growth for years to come.

Now let’s turn to our global sales performance.Our sales are reported on a fiscal year basis – that is, for the first six months of the current fiscal year. For Japan and the U.S., results are computed from April to September.In Europe, Mexico and several General Overseas Markets, fiscal year results are computed from January to June.For the first six months of fiscal year 2004 in all regions, Nissan’s sales totaled 1,596,000 units, an increase of 8.8%.

In the first half of the fiscal year, total industry volumes were down in Japan, flat in the United States, and slightly up in Europe and in General Overseas Markets.

Rising incentive levels continue to be a challenge in all markets.In the United States, even though Nissan incentives are up 20% compared with year-ago levels, our average is still less than half the industry average.We continue to keep a reactive approach to incentives while recognizing that we have to keep our prices relevant to the market.Despite the pressure, we prefer to keep the focus on our products and our brand instead of trying to be the best “deal” in town.

We launched one all-new model late in the first half – the Tiida – and eight more are being launched globally in the second half.Because of this launch schedule, we expect our sales to accelerate in the second half and through September 2005, when we will measure the sales of all the new products launched during NISSAN 180.

Our sales growth in the first half benefited mostly from new products launched in the second half of fiscal year 2003 – such as the Titan, the Armada, the Infiniti QX56.We are also encouraged by the popularity of some models that have been in the market for some time and yet continue to contribute significantly to our volumes – such as the Altima, the Murano, the Micra and the X-TRAIL.Nissan now has a solid lineup in every major market, allowing us to remain competitive even in the most challenging environments.

Let’s look at our performance on a regional basis, starting with Japan.In our domestic market, we sold 368,000 units, down 4.9% from the same period last year, while total industry volume has declined by 1.6%.Our market share stands at 13.6%, including minicars, one-half a percentage point lower than last year.The March and Cube continue to be in the Top 10 monthly sales ranking, and our performance in the minicar segment has doubled.We obviously expect our total sales volume in Japan to rise in the second half, driven by the six new models we announced in September.

Turning to the United States, sales in the first half came to 489,000 units, up 16.6%.Our U.S. market share is now 5.5%, up eight-tenths of a percent.

We made gains in both the Nissan and Infiniti channels. Nissan Division sales are up 19.2% in the first half, largely due to the Titan, Armada, Quest and Altima. Infiniti Division sales also continue to grow, rising 2% over fiscal year 2003’s record level.

Moving to Europe, Nissan sold 285,000 units from January to June, up 6.6% from the same period in 2003.We sold more than 90,000 Micras, and our range of 4x4s, particularly the X-TRAIL and Pickup, are significant and steady contributors to sales growth.Furthermore, we are encouraged by our growing sales even though we did not launch any new model this year.Our European team is now gearing up for the launch of five new models in calendar year 2005.

Turning to the General Overseas Markets, our performance has been good.In the first half, sales were up 15.2%, to 454,000 units.Let me highlight a few of the most significant markets.

• In China, we sold 84,000 units, including 44,000 LCVs.
• In Asia, we sold 92,000 units, up 18%, driven by strong sales in Taiwan and Thailand.
• And Mexico contributed 105,000 units, up 7% from the same period last year.

Let us now turn to our first-half financial results.

Revenues reached 4.008 trillion yen in the first half of fiscal 2004, up 12.7% from the same period in fiscal year 2003.Changes in the scope of consolidation – such as the inclusion of Dongfeng Motor Company Limited, Yulon Nissan Motor and Siam Nissan– impacted revenues positively by 225.2 billion yen.

Operating profits were up six-tenths of a percent to 403.4 billion yen, compared to the first half of fiscal year 2003.The operating margin is 10.1%.What were the drivers?

• The effect of foreign exchange rate movements to first-half operating profits was a negative 56 billion yen, of which 51 billion yen was due to the dollar.The average dollar rate came to 109.8 yen compared to 118.1 yen in the first half of last year… while the euro moved to 133.1 yen from 131.4 yen.
• The change in scope of consolidation that I just mentioned contributed an additional 17 billion yen to first-half operating profits.
• Volumes and mix contributed 110 billion yen in additional operating profits.
• Selling expensesproduced a negative impact of 59 billion yen, due to higher levels of incentives, particularly in the U.S. market.
• Purchasing continued to turn in a strong performance as lower purchasing costs generated a positive contribution of 68 billion yen to operating profits, which includes the impact from higher prices of raw materials.
• Product enrichment and the cost of regulationsproduced a negative impact of 30 billion yen.
• HigherR&D expensesgenerated a negative impact of 21 billion yen as we continue to boost investments in technology and product development.
• Manufacturing expenses had a negative impact of 9 billion yen, including, from one side, the benefits from increased manufacturing efficiencies and, from the other side, a 15 billion yen additional expense reflecting final ramp-up of our Canton Plant.
• Warrantyexpenses increased by 13 billion yen as a result of growing sales.
• General, administrative and other expenses produced a negative impact of 4.7 billion yen.

Had we not suffered from the negative effect of foreign exchange rates nor benefited from our expanded scope, our operating profit margin for the first half would have come to 11.3%, which is the same as the first half of fiscal year 2003.

On a regional basis, we benefited from profit increases from every region except Japan.

Profits from Japan amounted to 162.4 billion yen compared to last year's 193.3 billion yen profit, mainly as a result of lower volume and mix, higher R&D expenditures and unfavorable exchange rates.

In the United States and Canada, profitability increased to 169.5 billion yen compared to 159.7 billion yen last year.The higher volume and mix absorbed the negative impact from foreign exchange and incentives, resulting in a 10 billion yen increase over the previous year.

Europe continued to increase its contribution to profit, even as no new models were launched.Profits reached 19.3 billion yen, up from 11.5 billion yen in the first half of 2003.

Finally, in General Overseas Markets, including Mexico, the contribution to total profits increased significantly, to 52.1 billion yen from 31.6 billion yen, driven mainly by the addition of the newly consolidated companies.

Inter-regional eliminations resulted in a positive 100 million yen contribution compared to 5 billion yen in the first half of last year.

Non-operating items totaled a negative 2 billion yen, giving an ordinary profit of 401.4 billion yen, compared to last year’s level of 390.3 billion yen, mainly due to higher contributions from equity in unconsolidated companies, primarily Renault and Nissan Diesel.

Net extraordinary losses came to 30.9 billion yen, up from last year’s 22.2 billion yen, mainly due to charges for discontinued operations, including our manufacturing reorganization in Europe as well as charges associated with a withdrawal from a domestic regional pension fund.

Taxes amounted to 120.7 billion yen.Our consolidated effective tax rate came to 32.6%.

Minority interests – which are profits in fully consolidated companies that we do not own 100%, such as Aichi Kikai and Nissan Shatai – came to 11 billion yen.

Net income after tax reached 238.8 billion yen, slightly above last year's 237.7 level.

Our capital expenditures came to 185 billion yen, up 22.5%.

At the half year, we are in line to reach our annual ROIC target of 20%.

At the end of September, we had 100.2 billion yen in net automotive debt, including Canton and leasing obligations, which is better than our plan and significantly lower than the 278.1 billion yen of net automotive debt in September 2003.

As we consider the risks and opportunities before us, the most significant risks continue to be, first and foremost, higher levels of incentives, then high commodity prices and high interest rates.Our major opportunity continues to be the swift implementation of NISSAN 180.

Taking into account these risks and opportunities, we maintain our initial forecasts for the full year.We expect revenues to reach 8.176 trillion yen, operating profits to be 860 billion yen, which would give a 10.5% operating margin, ordinary profit to reach 846 billion yen, and a net profit after tax of 510 billion yen.

For the full year, we are expecting global unit sales of 3,380,000 units, a 10.5% increase over fiscal year 2003.

As we work to deliver our NISSAN 180 commitments completely, Nissan is making steady progress.Our performance and future potential have attracted 18,000 additional individual shareholders in the past six months alone.We are fulfilling our responsibilities as a global citizen while maintaining the highest levels of business performance.Today we are distributing copies of our first Corporate Sustainability Report, which summarizes what our company stands for and how we conduct our business.

Simply put, two factors lie at the heart of our performance:the high level of motivation among our employees worldwide… and our products.

Today we are bringing another new model to our customers in Japan – the Tiida Latio.Like the Tiida, its sister hatchback, the Tiida Latio has a high-quality touch that exceeds the class standard.Its modern interior is as spacious as a luxury sedan, with wide seats and ample rear seat legroom for comfort.With its pleasing refinement and affordable price, the Tiida Latio is sure to create a welcome new standard for compact sedans.