Can Datsun revive Nissan's fortune?

After nearly 30 years, Nissan Motor Company of Japan is reviving the Datsun brand. But it is India that will hold the key to the success of the brand.

At the world premiere of the first new Datsun car - the Go - in New Delhi last month, CEO Carlos Ghosn set the wheels rolling with just two words: “Datsun Go.”

Ghosn hopes the Go, which has been primed for the middle class, will help Nissan achieve the goal of capturing 10 per cent of the Indian market by 2016, up from its current share of 1.5 per cent.

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French-Lebanese-Brazilian Ghosn, 59, who manages two car companies—Paris-based Renault and Nissan—has always been bullish on India.

He was the first to talk of its frugal engineering skills and the potential for an entry-level car in the country. Now with Europe in distress, the country has become even more prominent in his scheme of things.

Ghosn expects 60 per cent of the total car sales globally to come from emerging markets in the future with a large chunk of it contributed by India.

“Ten years ago, Europe was contributing 30 per cent of the global car sales, now it is only15 per cent. For Renault, 45 per cent of the sales used to be from Europe,” he says.

It’s the opposite now, with a little over 50 per cent of Renault sales coming from outside the Euro zone.

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Changing dynamics

Demand has dipped in India too: June car sales dropped 9 per cent to 1.39 lakh units, according to Society of Indian Automobile Manufacturers. But Ghosn brushes it aside as a temporary phenomenon.

“What we are seeing (in India) is a correction, not a slowdown... it will be over by the year-end. I am very optimistic about the high growth markets, and from time to time, we need to adapt to the situation and correct our strategy,” he says.

To be sure, Nissan is a marginal player in the country, but Ghosn’s optimism stems from the poor car-to-people ratio.

At 15 cars per 1,000 people, the ratio in India is one of the lowest in the world. China has 60 cars for every 1,000 people, Brazil 200, Russia 280, Portugal 450 and the United States 800.

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And Ghosn is banking on the Go to drive sales. “People won’t accept cars that are 20 or 25 years old any more, or are built on old platforms,” he says.

The Go, which is slated to hit the market in 2014, according to him, will stand the test on all these counts.

The company has made substantial investment on the new product.

Together with its partner, Renault, Nissan has invested $2.5 billion to build production facilities in the country, including a plant near Chennai.

The car, which has been priced at below Rs 4 lakh, is expected to compete directly with Maruti Suzuki's Alto and Hyundai’s Eon.

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Initially, the Go will only have a petrol variant with fuel efficiency of 20 km per litre, but the company will also launch a diesel version later. In addition, more launches are in the offing under the Datsun brand.

The other cars  will be slightly more expensive than the Go.

More than anything else, the Datsun brand will help Nissan gain a toehold in the entry-level segment. With the launch of the Go, Nissan will sell three brands—Nissan, Infiniti and Datsun.

While both Infiniti and Nissan are in the premium segment (for people who have significant experience of buying cars), Datsun will be positioned in the mass-market segment.

“There is no overlap, or very little overlap, between the brands. It allows us to have very strong brand attributes without over-extending these attributes where they don’t belong,” says Ghosn.

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Volume play

Analysts agree Datsun will reap positive rewards for Nissan.

“This product will play for volume and market share,” says an analyst. Vincent Cobee, the head of Datsun, who was in-charge of its revival, says the company is targeting upwardly mobile women and men in high-growth economies who seek better value propositions in the products they choose.

Most of the buyers are expected to be first-time users.

“Datsun will be local products assured by a global brand, whereas Nissan products will be global products assured by a global brand,” says Cobee.

“With Datsun, we are aiming for the core segment of the market, where Nissan brands are not available.”

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To start with, the cars will be retailed through existing Nissan dealerships.

This, the company says, will help in establishing the brand which has nearly no recall in the country.

The strategy will then evolve naturally as Datsun grows and becomes an established brand in its own right.

The company also plans to increase its dealership from 145 right now to 300 by 2016.

Yaresh Kothari, research analyst (automobile), Angel Broking, says: “It (Datsun) has the opportunity that the Alto had some years back.  It would be in line with the Maruti Suzuki A-Star or even the Hyundai i10”.

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However, many others are cautious. “One needs to wait for the product to hit the market,” says an industry analyst. Also, he says, it remains to be seen how well the car does after the first year of its launch.

“If you look at older models like the Ford Figo, Chevorlet Beat and other small cars, they all did well in the first year, but sales declined after that,” he says.  

The Go’s design will have a few firsts. For instance, it will have a third seat in the front and a mobile dock system.

But whether these features will draw customers will to a large extent depend on what shape the market is at the time of its launch next year.