Nissan small car below Micra in concept stage

Kiminobu Tokuyama, managing director and chief executive officer of Nissan Motor India Pvt Ltd, is bullish on the Indian market with its small car Micra receiving a good response and the company moving on track with its various alliances. Nissan inaugurated its manufacturing facility in Chennai in March last year and commenced production in May, sales in July and exports in October. The company’s product launch plan in India is aggressive, as it nine models by 2012, of which five will be produced in India and four models will be imported from Japan.

The sedan on the V platform will be launched by the end of this yea. Tokuyama told DNA that he is optimistic about the company achieving the target of 1 lakh units by 2013. Nissan has already exceeded its parts sourcing (from India) target—it will close the fiscal with $35 million against the target of $10 million.
Excerpts from the interview:

Considering that Micra is receiving good response do you think having just 30 dealerships does justice to a product that sells in mass market? Would you rethink your arrangement with Hover and set up dealerships independently?
No, we will continue to work with Hover, which takes care of our sales, distribution and after sales. Nissan has been following the approach of working through alliances in India- we have one with Renault, Bajaj and Ashok Leyland. We have used a similar model in our dealerships by having an alliance with Hover and this will continue. We are still ramping up production and our mass production just started in May. Also, like other original equipment manufacturer, we are also facing parts shortage, which slows down production. As this problem exists, we are being cautious about our dealer network plan. We do not want to reach a stage where we are producing less but have more dealerships outlets.

We want to have dealerships at the right time and right place, we have received many dealer enquires— we can quickly set them as well— we need to properly supply to them so that it justifies their investment, too. Our 30 dealerships cover 80% of the Indian territory. We experienced this is in Japan where we put up many dealerships next to each other using different channels and that strategy did not work. This creates a lot of competition among the dealers, which we want to avoid.

Are you prioritising exports over domestic production?
If you look at our volumes, our export volumes are more than that of the domestic market. So, it seems like we are prioritising exports but that is not the case. In case of exports, we are catering to a vast territory so the volumes will definitely be high. We export to Europe, Middle East and Africa. We have exported around 40,000 units of Micra in the last 5 months whereas the domestic sales were around 10,000 units for the same period. We are not compromising with the domestic demand and delivering as many cars as possible to the Indian customers.

Is it also because the cost of manufacturing in India is lower compared with other countries where you have manufacturing facility?
 Yes that’s partly the reason. This move is a part of Nissan’s global supply chain management plan. In the case of Micra, it was earlier produced at our facility in UK for sale in the rest of Europe, but now that production has been shifted to India and the UK facility is made available to produce Juke model.

What is the update on the small car below the Micra? Will Nissan manufacture the car itself?
We see a lot of opportunity in India’s compact car segment and this small car is still in the concept stage. We are talking to different companies which could possibly be our partner in this project. Right now, we are still studying the concept. We are working on this concept through our collaboration between our Chennai and Japan R&D units.

How long will it take for the concept stage to be over?
We will have to wait and see. It will not take long as we are eager to capture the small car market.

Your joint venture with Ashok Leyland is to manufacture light commercial vehicles (LCVs), but the first batch of products will be multi purpose vehicles (MPVs), so how far are you from churning out LCVs from this joint venture?
We will start rolling out the MPVs this year— the first will be an Ashok Leyland product (bus and commercial vehicles between 5 tons and 7.5 tons) which will be launched this year, followed by Nissan’s MPV (NV200) which will be launched in 2012 and the third MPV will again be an Ashok Leyland batched product (this will be similar to Nissan’s NV200). Right now, there are no plans for LCVs.

How far have your plans to increase localisation on the X-trail succeeded?
We are still studying that possibility. After the Budget announcement of increase in duty on CKD kits (from 10% to 60%) we are awaiting the government’s decision. If it falls in OEMs’ favour then we will immediately go ahead and start the local assembly of X-Trail and Teanna.

Are plans to set up a financial arm still on?
We are considering that possibility. As per Indian rules and regulations, it is a little complicated to set up a financial arm by a multinational company as the money to set it up will be coming from our global headquarters. We can borrow money from domestic sources and we are not comfortable doing that.

Any plans of setting up an engine manufacturing plant?
At this moment we do not have that plan. We assemble our petrol engines at our Chennai facility while the diesel engine comes from Europe.