Welcome to this week's edition of The Forbes India Show. CNBC-TV18's Senthil Chengalvarayan and Forbes India editor-in-chief Indrajit Gupta interview Toshiyuki Shiga, COO, Nissan Motor in Chennai not far the Renault-Nissan joint venture factory which rolls out about 4,00,000 cars a year.
Below is the edited transcript of the show on CNBC-TV18
Chengalvarayan: Tell us how 2013 looks for the Japanese auto industry? Is Europe picking up? How negative has the effect of the dispute between China and Japan been apart from the 41-percent in sales in October? Has the situation begun to improve for Nissar in China?
A: Yes. Nissan's global sales in the calendar year of 2012 was 4.94 million, posting a 5.8- percent increase against the previous year. Despite the spat between Japan and China, the international sanctions on Iran and the crisis in Europe, Nissan is growing. We are expect further growth in 2013.
Chengalvarayan: Do you expect growth for Nissan alone or for the entire industry as a whole?
A: Both. The automotive industry in 2012 was around 79.4 million, increasing by around 6 percent and the industry is still growing.
Chengalvarayan: Will 2013 be better than 2012?
A: Globally, yes. There were a few difficulties before the Japan and China spat and the sanctions on Iran. However, the Chinese market still is growing at 5-7 percent. So, further growth may be expected in industry.
Gupta: Do you have an alternate plan in case Japan's relations with China worsen? And God forbid if it does, what are the options for Nissan?
A: I can't comment on the current situation but after the sanctions on Iran in mid-September 2012 we were significantly affected, but the situation is gradually improving. In December 2012 and at the start of January 2013, the number of the customers visiting our showroom has returned to normal levels
So, the customer traffic is improving. Effective orders from customers are slowly returning to 80 percent of last year’s levels. The trend in sales is also showing improvement. I expecting the governments of Japan and China to amicably settle the dispute to enable customers to get rid of any hesitation in buying Japanese cars.
Chengalvarayan: Are you happy with your progress in India?
A: I am satisfied with our progress in India. We have set some key objectives to be achieved in India. We have achieved the primary objective of entering the Indian market. We entered the Indian market in 2010 and commenced the sales of the Micra which touched around 30,000 units. In 2012, we sold 33,000 units. We aim to sell around 50,000 units this year. So, I think our growth in domestic sales is good. I have high expectations as our team in India is doing a good job.
Our Indian business has begun to export products worldwide especially to Europe, the Middle-East and Africa. Our manufacturing the team is also doing a very good job to enable exports by operating production according to schedule which also contributes to our business.
We have also set up facilities to tap India’s strength in engineering research and development. Our R&D facility employs around 2,000 people who are developing a very strategic car model- the Datsun- which will be introduced next year in the Indian market.
Gupta: How will that really fit into your game plan because the Datsun project is viewed as a fairly big strategic initiative across not just India, but Indonesia and Russia as well? Are you on track? Is that something that could really meet what you described as your ‘higher ambitions’ for the Indian business?
A: The Datsun brand is key to our strategy of garnering marketshare in the growing emerging market and in attracting the burgeoning middle- class yearning to buy their first car. Though I cannot disclose anything further, we are on schedule regarding the launch of the Datsun.
Gupta: Globally, you have adopted the strategy of co-badging and the Renault-Nissan combine has adopted that in India as well. Do you agree with the argument that the strategy hasn’t really fully paid off?
A: We are adopting the process of co-badging with care and continue to implement product differentiation strategies, conduct different marketing campaigns and target different customers.
But the reason for co-badging is that it allows us to enhance our product line-up. As we start with just one or two products, it is enables us to sustain the dealer’s network. The strategy will be abandoned after we expand our business and strengthen our line-up which will allow us to concentrate on marketing our own models.
Gupta: But how long will the co-badging continue?
A: I cannot say. As far as I understand, Renault’s Duster is doing well and this is good for the Renault line-up and will allow the company to focus more on their product.
The Indian market is important for the Renault-Nissan alliance. Our plant and our research and development facility is in joint venture with Renault. We are allied with Renault in business outsourcing or providing IT support. Our strategy to approach the Indian market is completely in line with our partner and we support each other through double-badging.
Chengalvarayan: Today you are one step removed from the customer because your dealers deal not with you but with a company in between - Hover Automotive. Is that a model that you are going to follow or will you, at some point of time, start dealing directly with your distributors directly?
A: We are using local partners because India is a completely new market for us. We do not have enough knowledge about customers, managing dealers or other details regarding the retail market. So we have tied up with a partner to handle these areas but we are also collecting a lot of information.
Gupta: That hasn’t satisfied the dealers because a lot of them stopped accepting stocks and some dealers have moved out from your franchise. Do you think the model needs to be reviewed or are you committed to the Hover arrangement?
A: I received the report in October 2012 about the conflict between Hover and the dealers also. I have also received complaints and requests to improve the relationship. We have to listen sincerely to our customers and dealers and if necessary, review the model in operation.
In my visit to India, I have held serious discussions with the Hover management and have requested them to improve the situation which they have promised. So I expect the situation to get better.
Chengalvarayan:. There are rumors that you will be launching your luxury brand Infiniti in India. Do you have plans for the Indian luxury market?
A: At the moment we have no concrete plans at the moment. The launch of the Infiniti brand depend on how much can be invested for the establishment of the brand in India. It is not just bringing the product, the brand has to be built and established in India. For me the brand is much more important. We are establishing the Nissan brand network and preparing for the launch of the Datsun. So once when we are established, we will be able to invest more.
Chengalvarayan: You have upped your Infiniti involvement with Formula One especially in 2013 as title sponsors for the Red Bull F1 racing team. What are your key takeaways from that relationship and what was your objective in increasing your involvement?
A: Nissan is now expanding the Infiniti business over the world. The Infiniti was born in 1989 and meant only for the United States. But gradually we are expanding the brand to China, the Middle East and Europe.
Unfortunately, awareness of the brand is very low and needs to be increased. Infiniti associated with Red Bulls F1 to offer a spirit of excitement. With the event now named Red Bull Infiniti, I expect the global awareness of Infiniti to improve worldwide.
Gupta: Can you tell us about your global electric vehicle (EV) project? Nissan is committed to shifting EV manufacturing to the US and also drop prices. But there are a lot of naysayers who believe that the electric vehicle will not become mainstream because the charging infrastructure was expensive and the the basic stability of the electric-vehicle technology was not proven. How confident are you about the EV?
A: In 2012, the auto industry sold 79.4 million units, this year it maybe more than 80 million units and in 2020 it maybe more than 100 million units with increase in production in China, India and Brazil. This will lead to increased use of fossil fuel which will cause considerable environmental damage and lead to a global shortage of energy.
So the only way to bring this product to the next generation is the shift from fossil fuels to renewable energy with zero-emission vehicles such as electric vehicles that utilise natural or renewable energies. This is the only way and as human beings we have to shift. As the current generation it is our responsibility to make the change.
Chengalvarayan: How quickly can the shift be effected in the face of the twin problems of making batteries affordable and setting up a network of charging stations?
A: This is our challenge. We started selling electric vehicles sales at the end of 2010 and after two years, the response was significant. We were able to understand the difficulties, barriers and roadblocks in selling electric vehicle which can be categorised into the challenges regarding price, driving or handling and infrastructure.
If these three challenges can be resolved, we will be able sell more electric vehicles. We reduced costs and lowered prices a little in the United States and Japan and we spending a lot of resources to create better batteries to lengthen the period of drive as much as possible. In Japan and the United States we have take considerable effort to establish infrastructure for quick charging. Though this is not an easy task, but I think we at Nissan completely believe that this is the right thing that we should do as an automotive company.
Chengalvarayan: Do you think governments will impose a penal tax on fossil-fuel cars that could change the nature of the auto sector? As a large automotive manufacturer would you welcome such a move with your large stake in fossil-fuel cars?
A: I am sorry that I don’t know the situation in the India regarding the amount of government support to electrical vehicles. In the United States, the government offers income-tax exemptions to customers who buy electric vehicles from 7 cents to USD 500. In Japan the government offers an incentive subsidy.
Chengalvarayan: Do you think governments should offer incentives to the manufacturers of electric cars?
A: I welcome such support and with the entry of strong competitors like Toyota into the electric vehicle business, it will be easy to establish the infrastructure and induce governments to offer more support. So the electric-vehicle challenge is not just about boosting Nissan’s business, but also about making a contribution to the environment as a member of the automotive industry.