As the struggling Japanese brand Nissan suffered its first setback since Carlos Ghosn took over the company, it looks to increase its operations in India. Nissan's outing in the Indian auto market is supported by its alliance partner Renault. Recently, the Alliance introduced the Logan in the growing Indian auto market. In the planned operation expansion that Nissan is set out to do, there are issues concerning their relationship with French partner Renault.
As part of Nissan's expansion in India, Chief Executive Carlos Ghosn revealed that they are planning to turn India into a supply base. He explained the role that India will play in the future of Nissan's supply base. "During 2006, we made tangible progress towards the four key breakthroughs that are central to the Nissan Value-Up programme. One of these involves developing new sources for parts, machinery and equipment, vendor tooling and services in what we call leading competitive countries," says Ghosn. "Sourcing bases are now established in China and Asean for Japan, in Mexico for North America, in Eastern Europe for Europe. To accelerate the progress, the next step will be to develop a new sourcing base in India. In fiscal 06, for Japan, North America and Europe, 15 per cent of our purchasing by value was sourced from LCCs. In 2007 we will take this to 24 per cent," he further explains.
Ghosn also said that they are not only going to increase their presence in the Indian auto market but they will also look for suppliers which will provide them with high quality parts. Auto motive components such as are what Nissan needs to deliver high quality vehicles to their consumers. "We are going to India not only to contribute to the development of the Indian market but also to tap suppliers who are very efficient," said Ghosn. "Renault is already sourcing from India with the Logan and Nissan will check with them and source locally for both Indian and global products." He pointed out that they are already taking steps to select which suppliers they will be working with. "Already there is a common purchasing organization that is working on that called the Renault Nissan Purchasing Organization," says the Nissan CEO.
Aside from being a supply base, Nissan and Renault are also planning to exploit India's IT capabilities. "As for IT and engineering services, India is being considered for that too," Ghosn said. "Nissan has an office which employs 800 engineers in Vietnam which supports its technical centre in Japan. We will have the same thing in India. The engineering talent in India remarkable and we want to tap into that." The fiery CEO of Renault and Nissan also explained what they are planning to do in India in terms of developing new vehicles. "Nissan has an office which employs 800 engineers in Vietnam which supports its technical centre in Japan. We will have the same thing in India. The engineering talent in India remarkable and we want to tap into that," explained Ghosn. "So any small car platform for the Indian market or the BRIC markets will include either Indian engineering inputs or will be developed in India. You can expect a lot of hiring in India." This will surely help the country's economy which will ten enable more citizens of the country to afford their vehicles. It is indeed a win-win situation for both the company and the country.
One issue that surfaced when Nissan and Renault announced their operation expansion in India is which company will be having control of the engine plant that the alliance has in India. To this, Ghosn said that: "That issue is entirely open. Certainly the alliance between Nissan and Renault will use that facility. But we haven't decided whether it should be divided between Nissan and Renault or one should run it and deliver the engines to the other." Ghosn also explained how Nissan and Renault will be working in terms of developing new platforms for vehicles to be released in India. "We don't believe in joint product development but repatriation. That means either company does work for both," says Ghosn. "If there's a new technology, then either one of the two companies will develop it for both. But frankly if we want to develop a platform or products for India, we will do it with an Indian partner. That will ensure Indian input which is very important for the project to be cost effective. It has to be an alliance to work."
There are talks that Nissan will be offering a vehicle similar to the Logan that Renault introduced to the Indian market recently. Ghosn also extolled the virtues why the Logan is well received in India. "Logan works because it is cheap," explains Ghosn. "And no! Nissan won't have a Logan. It is important to develop a specific platform to compete at a much lower price band. All B-seg platforms don't contribute to the bottom line. And thanks to the growth in developing markets, you need cheap cars that are also profitable for the bottom line. People in these markets want cars that offer big space but at an attractive price. The Logan is very spacious, very robust, comes with an AC and other essential features but it is still cheap."
With Nissan and Renault increasing their presence in India, it would be just a matter of time before Nissan get back to its winning ways. The Japanese company needs the expansion to upset the losses they have suffered in recent times.
