Nissan Re-Launches Datsun In Cheap-Car Variant To Grab Pie Of Indian Auto Market

Nissan Motor Co takes the veil off the first car in its resurrected Datsun brand in India -- a $6,500 hatchback -- that is part of a foray by the Japanese automaker into cheap cars for emerging markets.

GURGAON, HARYANA, INDIA (JULY 15, 2013) (ANI) - Nissan Motor Co. took the veil off the first car in its resurrected Datsun brand in India on Monday (July 15) -- a $6,500 hatchback -- that is part of a foray by the Japanese automaker into cheap cars for emerging markets.

With other Datsun models to follow over the next three years - one of which could be priced as low as $4,000 -- if Nissan can meet its aggressive manufacturing cost objectives -- Nissan is treading ever so closer to the ultra-low-cost car market.That market in India is now famously occupied by Tata Nano, a barebones car that retails for $2500.

Nissan Chairman and CEO Carlos Ghosn unveiled the latest variant, called the Datsun 'Go' on the outskirts of the Indian capital in IT hub of Gurgaon, often referred to as India's millennium city.

Go would compete for market share with Japan's Suzuki Motor Corp and South Korea's Hyundai motors who together control nearly two-thirds of the Indian automobile market.

The move to introduce a cheap car has been generally resisted so far by other global auto giants, such as Toyota Motor Corp., out of concern a scruffy, ultra-cheap car model could tarnish their high-value brands.

But Ghosn said the global auto landscape was changing and auto makers needed to adjust to the new realities.

"Our production and delivery plan for the Datsun brand reflect Nissan motor company's commitment to building manufacturing capacity and establishing a meaningful presence in growth markets like India and to keeping pace with rapid changes in the world's auto industry," said Ghosn.

Since Nissan plans to market Datsun cars in India through its existing Nissan-branded dealerships, Datsun could expose the Japanese auto maker to similar risks, though executives downplay the possibility.

They say use of a separate brand name should effectively shield Nissan's brand image. Datsun, which Nissan once used for its cars outside Japan, has a history dating back to the 1930s.

The Nissan chief said a majority of the global car sales would come from the emerging markets like India, China, Russia and Brazil instead of the conventional markets like the US and Europe.

"Today the global auto market is in a period of significant transition. Five years ago the majority of car sales took place in the world's most mature markets, includingEurope, Japan and United States. High growth markets including India, Brazil,China, Russia and Indonesia, accounted for 40 percent of all sales. But this ratio is shifting quickly. By 2016, we expect 60 percent of all auto sales to take place in the world's high growth markets," Ghosn added.

To make Datsun cars affordable, Nissan has been aiming to reduce manufacturing costs to $3,000 to $5,000 per vehicle. The first car is due for a launch in India early next year and officials say the company has partially achieved the cost goals.

"We see significant opportunities in these growth markets where demand for cars is increasing and we continue to do so. For example, here in India total industry volume passed three million unit mark in 2011 and is expected to reach four million units by 2016. To meet this rise in demand Nissan motor company is delivering 10 new models, including the all-new Datsun 'line-up' to India, by 2016, as part of our power 88 mid-term business plan," Ghosn said.

Still, as price-competitive as that may be, it will face formidable competition fromMaruti Suzuki and Hyundai Motor Co.

Maruti has about 1,200 retail stores in India, while Hyundai operates a network of more than 350 stores. Nissan, by contrast, has only about 100 dealers, though it says it plans to triple the number of its stores to 300 by March 2017.

Nissan said last year it would revive the Datsun name as a marquee for emerging markets, starting with India, Russia and Indonesia. Eventually, it wants to expand into Southeast Asia, Latin America, the Middle East and Africa.

To make the new name stick, Nissan does not plan to stop with a $6500 car. It plans to expand the Datsun brand's appeal by following its first car with a second model by the end of next year and a third vehicle by 2016.

By the year ending March 2017, Nissan wants to capture 10 percent of India's overall passenger vehicle market that includes sedans, sport-utility vehicles and vans. Nissan had a market share of less than 1 percent as of May, data from the Society of Indian Automobile Manufacturers shows.

India has a relatively limited auto parts supply base so procuring almost all the necessary components locally poses a challenge. Nissan aims to pull off the feat not only in India, but in Indonesia and Russia as well.

Nissan thus will likely avoid developing new technology. Instead, it will use tried technology, in particular vehicle underpinnings, engines and transmissions, which are costly to develop. It is also likely to pare down expensive features such as power-windows, navigation systems, and extra safety airbags.