Nissan: Small Is Beautiful

Renault is using their Dacia subsidiary to produce cheap cars for Eastern Europe and other emerging markets (such as Germany, where Dacias had been snapped up during the Abwrackprämien-orgy.) Meanwhile, Renault’s Japanese twin Nissan is starting to feel a little left out. Yes, they have the Nissan Pixo, which is a rebadge of the Suzuki A-Star, which is built in India (and was recalled recently), but Nissan seems to want something of their own and they want the Indian truck manufacturer Ashok Leyland to help. Sounds easy enough … The Hindu reports that Nissan is in talks with Ashok Leyland to jointly develop and build a small car, priced around $4500 – $5000. Nissan says it’s business as usual: “We have a formal agreement with Ashok Leyland for making light commercial vehicles in India…in addition to that we also use Ashok Leyland’s engineering services for various purposes. At the moment we are talking to them and many other partners in China, Indonesia…for a price centric vehicle,” Nissan Motor Co Executive Vice-President Collin Dodge told reporters at the Geneva Motor Show.

He then went on to mention that companies like Volkswagen, GM and Ford couldn’t produce a small car for such a low cost without partnering with a local firm (such as Volkswagen and Suzuki.) I think that’s management speak for “take advantage of locally produced cheap labor”.

When asked where this global small car will be most prevalent, Mr Dodge replied “China will be the number one as the segment is growing in a big way there with about two million units. India will be the second market.” And therein lies a problem. For this car to work in these two countries, cost will be a key factor. Which is why it is worth noting that India and China do not have a free trade agreement between the two. China have been pushing for one for five years and India have said nothing. The closest these two have come to a free trade agreement is the ASEAN pact. In it, India can trade freely with the ASEAN members and China can trade freely with ASEAN members, just not with each other. If Nissan wants to make this small car work in both markets, they’ll either need to build 2 factories, one in China and one in India (which may eat into profit margins of the car) or lobby hard for a free trade agreement between India and China. Good luck with that.