Renault-Nissan: Building with BRICs
Source: Courtesy of INSEAD Knowledge , Author: Grace Segran
Posted: Wed December 21, 2011 2:06 pm

INTERNATIONAL. Carlos Ghosn is spending more than a billion US Dollars to get a better foothold in Brazil.

To the lay observer, it’s hard to pinpoint just what’s going on in the car industry today: in Europe, the debt crisis means that car sales for 2012 are going to be uncertain; however, car sales in Brazil, Russia, India and China -the BRICS- are heading into another record year.

On the other hand, the Japanese yen has been steadily increasing in value against the U.S. dollar, making it very expensive to continue manufacturing cars in Japan, forcing carmakers to relocate their assembly lines.

Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance, is among them. Unveiled in October, Nissan plans to spend US$1.4 billion on a new factory in Brazil and expand its existing Renault plant there.

Speaking to INSEAD Knowledge on the sidelines of the Women’s Forum of the Cartier Women’s Initiative Awards in Deauville recently, Ghosn said “The ramp up of the plant should be very fast.” Indeed. It’s expected to be operational in 2014.

Ghosn says Brazil presents a good opportunity for expanding Nissan’s operations as the country’s car market is the fourth largest in the world behind the US, China and Japan, and is second only to China among emerging markets for new cars. Over the next few years, Brazil is expected to overtake Japan as the third largest market for cars.

Why Brazil?

“Practically all the cars sold in Brazil are being imported from Mexico and you cannot sustain an offensive in a large market like Brazil just by using imports,” Ghosn argues. “Nissan reached a distribution level at which it was time to switch to local production.”

He believes that there is still room for Nissan to grow within this market, that the cars produced by the new plant will appeal to consumers “who want an Asian car, who are cross-shopping between Toyota, Honda, Nissan, Hyundai, Kia…and looking for reliability and fuel efficiency. This is where Nissan is going to be competing.”

Moreover, there is plenty of room for growth: eight out of 10 people in the U.S. have cars, while in Brazil there are only 2.5 cars per 10 people.

The electric car

Another reason for increasing car production despite the gloomy economy is the surge in the demand for electric vehicles. The Renault-Nissan Alliance has capitalised on this new market trend by developing zero-emission electric vehicles. Under Ghosn’s leadership, the Alliance funded the development of the Nissan Leaf, an electric car that was launched in late 2010 in the U.S. and Japan.

Ghosn claims that consumers are welcoming the Leaf. “Today, we are selling 1500 Leaf cars a month and frankly we can sell more if we are able to supply more. I think the pent up demand for electric cars in the U.S. is much bigger than this.”

The Leaf has already set the record for being the most-sold electric car in history. Now, other car manufacturers are trying to get in on the market for electric zero-emission cars. General Motors has recently announced plans to develop its own electric vehicle. Is Ghosn worried about the potential competition?

“Not at all. Our objective is to promote electric cars…We welcome competition because competition will help stimulate the market.”

Women in the industry

As the Renault-Nissan Alliance expands its reach, Ghosn says there will be plenty of opportunities for women to participate in what has been a largely male-dominated industry. Although cars have largely been associated with men, Ghosn points out that women are actually the key decision-makers when buying a car: “More than 50 percent of the cars sold in the world are a woman’s decision. In some countries it is even 66 percent. This is an industry providing a product in which the decision to purchase lies with women.”

Ghosn says that the car industry must adapt to this new reality. Car manufacturers are not taking into account that women are influenced by different factors when buying a car than are men. “We know very well that women do not shop the same way as men do. They don’t look at cars in the same way as men.”

Currently, men tend to be largely responsible for making decisions relating to the production and the sale of cars. In Ghosn’s view, car manufacturers must search for female talent to produce cars that will meet the needs of the market in the future.

 “Today we are totally unbalanced in terms of gender. There are a lot of prospects for talented young women to join the industry. We need more women in design, in product planning, in engineering. We need more women in the sales, in the marketing.”

The automobile industry is in the middle of an exciting period of growth. However, car manufacturers need to be constantly adapting and innovating to maximise on this surge in demand.

Ghosn who is leading the Renault-Nissan Alliance to move the industry forward is very optimistic about the future as “there are plenty of opportunities.”

This article is republished courtesy of INSEAD Knowledge

Copyright INSEAD 2011

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