Nissan: How Much Of The Tariff And Dollar Hit Can Really Be Passed Through
In 2025 Nissan showed that its pricing-reset mechanism works only partly: most of the US raw-material inflation was passed to customers, but a meaningful share of the Israel-to-US tariff burden and the FX hit stayed inside gross profit. That matters because 2026 will be judged less on volume and more on pass-through quality.
The main article already established that Nissan ended 2025 with a more stable volume base and a much better fourth quarter, but without proof that the improvement is already flowing cleanly to shareholders. This follow-up isolates the one junction that matters most for the 2026 read: how much of the tariff and dollar shock the company can really pass on to customers, and how much still remains inside gross profit.
The short conclusion: Nissan does have a pass-through mechanism, but it is partial and asymmetric. When the cost increase sits in raw materials for the US plant, the company managed to push most of that burden to customers. When the tariff sits on exports from Israel to the US, that ability weakens materially because the company chose to keep uniform pricing between the Israeli plant and the US plant. FX tells a similar story: the company resets prices in source currency, diversifies part of its funding mix and occasionally uses forward transactions, but 2025 shows that those tools are still far from neutralizing the full hit.
Three points are worth holding upfront:
- The FX hit alone was larger than the full-year revenue decline. Shekel strength cut revenue by about NIS 45.8 million, while reported revenue fell by only NIS 12.3 million.
- FX was also the biggest hit to operating profit. Shekel strength reduced operating profit by about NIS 14.35 million, more than the full-year operating-profit decline of NIS 7.1 million.
- Tariffs were not absorbed evenly across the chain. Raw materials imported into the US rose by about $2 million and were mostly passed through to customers, but tariffs of about $2.4 million on exports from Israel to the US were absorbed to a meaningful extent by the company itself.
Nissan's Pass-Through Mechanism Exists, But It Does Not Work In Real Time
Nissan is not exposed to the dollar, the euro and raw materials with no tools at all. The company partly matches raw-material purchases to the currency mix of sales, spreads financing across several currencies, and occasionally executes forward transactions in dollars and euros. At the same time, most raw-material price changes are passed through to customers under existing agreements on a quarterly, semiannual or even monthly basis. That matters because it means the company does have a pricing framework rather than a fully rigid price list.
But 2025 also shows the limit of that framework. The company executed only 6 forward transactions during the year, and they generated only about NIS 564 thousand of profit. That is a very small number against a NIS 12.6 million gross-profit hit and a NIS 14.35 million operating-profit hit from shekel strength. In other words, the financial hedge exists, but it is nowhere near large enough to change the operating picture.
These numbers matter not only because they are large, but because of what they say about pass-through quality. If Nissan's pricing engine were closing the gap quickly enough, shekel strength would not by itself erase more than the entire yearly decline in revenue, and certainly would not cut more operating profit than the full-year operating-profit decline. The math here is simple: volume did not collapse, sold quantity actually rose by about 1%, yet the FX damage still remained deep inside margins.
Where Pass-Through Works, And Where It Breaks
This is the core of the follow-up. In practice the company describes two very different cost-transfer mechanisms.
| Item | What happened in 2025 | What moved to the customer | What stayed with Nissan |
|---|---|---|---|
| Raw materials for the US plant | About $2 million of inflation from the tariff program | Most of the increase was passed through | Only a small part stayed in margins |
| Exports from Israel to the US | The company paid about $2.4 million of tariffs, about NIS 7.7 million | Not all of it was passed on | A meaningful part was absorbed in gross profit |
| Tariff program in the second half | More than NIS 5 million hit to gross profit | Only partial | The damage stayed in the reported numbers |
| Q4 on its own | The export tariff from Israel cut gross profit by about NIS 3 million | Not fully | Direct pressure remained on margin |
What is really interesting is the reason for the gap. Nissan chose to keep a uniform price for identical products whether they come from Israel or from the US plant. That is a rational commercial choice: it helps preserve customer relationships, keeps quotations consistent, and avoids pushing customers to shift demand between plants just because of a temporary tariff. But that decision also has a clear economic cost. Once the tariff lands specifically on goods exported from Israel to the US, and the customer still gets a uniform price, the company itself becomes the shock absorber.
That is also why it is important not to confuse "ability to raise price" with "ability to preserve margin." Nissan does show some ability to pass through inflation when the issue is raw materials and formula-based customer pricing. It is much less free when the event is a tariff that falls asymmetrically on one production base while customers still expect commercial uniformity. So Nissan's pass-through is not weak everywhere. It is weak precisely where the operating architecture creates a mismatch between production cost and commercial price.
The Dollar Hurt More Deeply Than The Tariff
Tariffs attracted a lot of attention, and rightly so, but 2025 shows that the dollar move was the deeper event. The average dollar rate in 2025 was NIS 3.4529 versus NIS 3.69 in 2024. In the fourth quarter the gap was even sharper: NIS 3.2491 versus NIS 3.6128 in the comparable quarter, roughly a 12% strengthening of the shekel. This did not stay at the macro headline level. The company quantified the damage at every major earnings layer.
On a simple arithmetic read, without the NIS 45.8 million FX drag, 2025 would not have looked like a revenue-decline year at all. It would have looked like a year in which the underlying business generated tens of millions of shekels of offset through volume, pricing and mix. The same principle holds at operating profit: when FX alone cuts NIS 14.35 million, more than the entire yearly decline in operating profit, the implication is that Nissan's problem is not missing demand. It is incomplete pass-through of macro pressure to the customer.
This is also where the gap between operating protection and accounting protection becomes visible. The company says the main effect of the dollar and the euro runs through revenue, gross profit, operating profit, other profit and equity from translation of foreign operations. The year-end sensitivity table shows that a 10% move in the dollar still changes pre-tax profit by about NIS 7.1 million and equity by about NIS 36.6 million. In other words, even after pricing measures, raw-material matching and partial hedging, a material FX exposure remains.
That point matters even more because 2025 actually got some relief below the operating line. Net finance expense fell to NIS 13.3 million from NIS 16.4 million, while finance income from exchange differences rose to about NIS 3.2 million from about NIS 1.4 million a year earlier. So even a year in which the finance line worked in the company's favor could not erase the FX damage at gross profit and operating profit. That sharpens the point: the real pressure sits in pricing quality, not only in the debt structure.
What Has To Change For Pass-Through To Look Credible In 2026
2026 will not be judged first on revenue growth. It will be judged on what happens between the sale and gross profit. If Nissan wants to convince the market that 2025 was a transition year rather than a ceiling, it has to show three things at once.
The first is shorter timing gaps. The company already says most raw-material price changes are passed to customers, but at frequencies that can be monthly, quarterly or semiannual. In a year of sharp FX moves and mid-year tariffs, that delay is enough to erase margin even if price is eventually reset. The market will look in coming quarters not only for higher revenue, but for evidence that FX damage per unit sold is narrowing.
The second is less absorption on the Israeli line. As long as the company keeps uniform pricing between Israel and the US, it is effectively deciding that part of the tariff stays with Nissan. That can be a reasonable choice if it protects customer relationships, but then something else has to offset it: better utilization, a stronger production mix, or faster price transfer. Without one of those, new volume can become expensive volume.
The third is operating margins strong enough not to rely on help from the finance line. About 96% of the company's financial liabilities carry floating interest, and the company's own estimate is that a 1% move in variable rates changes annual cash finance expense by about NIS 1.3 million. This is not Nissan's main problem, but it is a useful reminder that there is no large cushion here to absorb FX, tariffs and funding costs all at once without fixing price.
Bottom line: Nissan is not a company with no pricing power. It is a company with partial pricing power, shaped by customer terms and geography. 2025 proved that the company can pass through a fair amount of raw-material inflation. It also proved that on Israel-to-US tariffs and on the dollar, part of the burden still gets stuck inside Nissan's own margins. That is why 2026 will be decided less by whether contracts and volume exist, and more by whether each dollar of sales starts leaving more gross profit with the producer rather than with the customer.