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Nissan revs up India plans despite auto market woes

The Japanese carmaker is rolling out new models at a time when car sales in the country have been sliding from bad to worse. For Nissan, a 10 per cent market share in India is critical for its goal of a global market share of eight per cent (currently it is six per cent) by 2016-17.

N Madhavan | July 11, 2013 | Updated 13:57 IST

N Madhavan
N Madhavan
The car market has been sliding from bad to worse - total passenger vehicle sales in India shrank by almost 10 per cent in April-May this year compared to a year ago, against a marginal  two per cent growth in 2012/13. But if there is one car maker which has been active despite the times, it is Nissan Motor India. In the past few weeks the company has launched its sedan Sunny which has continuously variable transmission (CVT), unveiled two new models of its compact car Micra - the New Micra and Micra Active and also announced that its compact SUV Terrano will hit the market soon.

That is not all. On July 16, Carlos Ghosn, the CEO and Chairman of Renault-Nissan Alliance will unveil the brand 'Datsun' in New Delhi. The Datsun car itself is expected to be unveiled at the 2014 Auto Expo in New Delhi next January and will hit the market some time in April next year. The indications are that it will be priced well below Rs 4 lakh.

The spate of launches by Nissan is aimed at reviving its fortunes in the second fastest growing car market in the Asia Pacific (after China). To meet the goals of the Nissan 'Power 88' strategy that is being implemented by the Japanese car maker, it needs to achieve a market share of 10 per cent in India by 2016/17. Its current share is just 1.5 per cent. A 10 per cent market share in India is critical for Nissan to achieve the Power 88 goal of a global market share of eight per cent (currently it is six per cent) and an operating profit of eight per cent as well (currently 6.2 per cent) by 2016-17.

Nissan entered India in 2010 and launched its first car, Micra, in July that year, but consumer response to its products have so far been lukewarm. In the three years Micra has been in the market it has sold just 43,000 units - a little over 1,000 units a month in the small car segment, whose average monthly volume is 66,000 units. Its other model Sunny has done relatively better and notched up a 12 per cent market share its segment in 2012/13. Evalia, its third product, was recently launched and is yet to create ripples in the market. It is exports that have sustained the company's operations in India. In 2012/13 the company exported 98,971 units compared to its domestic sales of 36,955 units.

Many factors have contributed to Nissan's woes in India. It got the positioning of its products, especially Micra, wrong. In addition, the Renault-Nissan alliance's decision to cross-badge their cars complicated the situation. Micra was cross-badged as Renault Pulse and Nissan Sunny as Renault Scala. The strategy failed as both Nissan and Renault were relatively new brands and their brand awareness was not strong enough. Also, in the absence of a proper communications strategy, the Indian consumers were confused and they avoided both the car brands.

The other issue was the problem Nissan faced with its dealers. Having made large investments, poor domestic sales of Nissan cars hurt the dealers as volumes of service and spare parts sales remained poor. They soon began to bleed. That coupled with the fact that the dealers had to deal with a master franchisee Hover Automotive - and not directly with the company - whom they found unresponsive, led to a revolt. Unhappy dealers, who are the face of the company as far as customers are concerned, further hurt sales.

Nissan, its officials say, has taken steps to contain the dealer annoyance. It now holds periodic meetings directly with its dealers. It has also learnt from its mistakes. Investments that new dealers have to make have been reduced in order to make dealerships viable. "We now have 95 dealers covering 60 per cent of the market and this figure will touch 150 by end of this fiscal. In 2014/15 we intend to add another 100 dealers," says Sunil Maddala, Vice-president, sales & CRM, Hover Automotive - the master franchisee of Nissan. The bulk of the new dealerships, according to Maddala, will be in newer towns where Nissan had no presence hitherto.

The company through its recent launches is also addressing the product gaps and positioning issues. Through Terrano, its compact SUV, it will be present in one of the fastest growing passenger vehicle segment. Renault Duster (which will be cross-badged as Terrano) is the hottest selling compact SUV and in less than a year has grabbed 25 per cent of the compact SUV market.

Through the New Micra the company hopes to set right the perception (caused due to cross-badging) that the old Micra is a poor cousin of Renault Pulse. The New Micra comes with a new design, interiors and sports the CVT technology. It is positioned as a premium car in the B+ segment. One of the reasons the company conceded for Micra's lesser than expected success was in not conveying the 'value for money proposition' to the consumers properly. This the company has now attempted by launching 'Micra Active' which boasts of higher mileage and a pricing below Rs 3.5 lakhs. With New Micra and Micra Active, Nissan now addresses both the B and B+ segment of the compact car market.

Datsun is purportedly the company's trump card. The car has been under development in India for a while and it is expected to be price well below the Rs 4 lakh mark. Though details of its features are not out yet, analysts expect a very aggressive pricing. "With Datsun we will target a completely different set of car buyers," says Maddala. The expectation is that it will target first time buyers with a smaller engine, attractive pricing and high mileage.

Carlos Ghosn has bet big on the emerging market to ensure his Nissan Power 88 strategy succeeds. He wants the share of sales (by volume) from emerging market to rise to 60 per cent from the current 40 per cent by 2016-17. Success in India is critical to achieve this. He will be India next week and his prime objective will be to create excitement about Nissan and its products. Only time will tell if the consumers in India will buy into that excitement.

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