Nissan is discussing pulling out of South Korea, as the Japanese carmaker’s sales rank among the hardest hit by an escalating diplomatic and trade row between Tokyo and Seoul, according to multiple people familiar with the company’s thinking.

The potential move comes after sales of Japanese cars in South Korea more than halved in August from 12 months earlier as a wave of public anger was channelled into boycotts of Japanese products. 

Bilateral relations between Japan and South Korea have deteriorated since last year after a South Korean court ordered Japanese companies to compensate victims of forced labour during the second world war. Tokyo says all claims were resolved by a 1965 treaty under which it paid damages to the South Korea government.

Tensions escalated further when Japan imposed a series of export controls on products critical to South Korea’s tech groups.

Nissan’s deliberations are a sign of the potentially wider fallout against some of the country’s biggest brands.

The carmaker’s annual sales in South Korea have only ever numbered in the few thousands, with the company selling just 58 vehicles in South Korea in August, according to the Korea Automobile Importers & Distributors Association — an 88 per cent fall compared to the same period in 2018.

Nissan’s discussions over stopping sales and marketing of vehicles in South Korea comes as part of a broader overhaul of its global operations that could also see the company withdrawing its premium Infiniti brand from multiple markets, said the people.

The restructuring follows Nissan’s announcement in late July of a huge collapse in profits, substantial job cuts and a reduction of the number of different models it produces. 

The company is still trying to grapple with the fallout from the November arrest of Carlos Ghosn, its former chairman, and the effect his absence has had on Nissan’s alliance with Renault.

Questions are also increasingly being asked about the immediate future of Hiroto Saikawa, Nissan’s chief executive. On Wednesday, he admitted that he had been overpaid as part of a share-linked incentive scheme — an issue that Nissan said was not illegal but was in violation of in-house rules. 

In July, Mr Saikawa said he would preside over the initial restructuring phase until March, but its second phase will probably be overseen by a new management team.

Nissan executives are also assessing its future involvement a factory in Busan owned by Renault Samsung Motors, a joint venture in the Korean city that produces a sport utility model that Nissan also manufactures at one of its factories in Japan and the US.

Nissan has been analysing whether it should continue selling vehicles in South Korea for several months, but the discussions accelerated significantly as relations between Tokyo and Seoul soured, according to people familiar with the situation.

Boycotts of Japan-made products have also hit popular brands of cigarettes and beer, and seen many Koreans cancel plans to holiday in Japan. 

Nissan declined to comment.

Additional reporting Kang Buseong

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