Has the Datsun gamble paid off for Ghosn?

The latest commercial for Nissan's Datsun cars leaves no doubt on what the company's ambitions are in India. The ad shows actor-singer Ayushmann Khurrana manoeuvering his Go+ through tight corners and actor Alok Nath chatting with friends about the compromises on mileage and space that one has to make while choosing a car. When Khurrana zips past Nath, the veteran actor is taken aback. As he stares at the car in amazement, Khurrana delivers the punchline about breaking from the tradition and accepting the nayi parampara.

It is a theme that Nissan has stuck with for two years. Since the relaunch of the Datsun brand last year, it has been educating viewers on the new tradition (a departure from the traditional cars) with the help of the same actor duo. But the new-found aggression of the ad that takes Maruti head on shows the company's growing desperation in India. Nissan's 60-year-old French-Brazilian executive, Carlos Ghosn, is hard pressed to revive the company's fortunes.

Nissan, which has a manufacturing partnership with France's Renault in India, does not have a car that can give established players a run for their money. Renault, too, has failed to make a mark beyond its SUV, the Duster. While sharing of platform has resulted in cost saving (they have six models on shared platforms and 12 products in all), it has also led to the two companies eating into each other's pie. The Duster's share, for instance, dropped to 12 per cent in December 2014 from 17 per cent in the same period a year earlier, whereas the Nissan Terrano, which is based on the same platform, gained six per cent share.

The cars under the Datsun brand, which was launched last year to make a mark in the low-cost segment that is currently dominated by Tata Nano, Maruti Alto and Hyundai Eon, are also struggling. The Go registered sales of just 507 units in November, nearly a fourth of Tata Nano's 1,900 during the same month. For the April-November period, average monthly sale for the Go has been around 1,300 units in comparison with Maruti Alto's 21,000 and Hyundai Eon's 6,500.

"In a way, the Go was the hatchback twin of the Fiat Linea - a car with the size that put it in a higher segment and a price that put it in the lower segment. Either way you look at it, it looks out of place though it also has the potential to be a game changer," said a report by Emerging Markets Automotive Advisors.

Still, sales have not been encouraging. The company says establishing the brand was more important than volumes, and in that limited sense it has succeeded. Vincent Cobee, global head (Datsun), says, "Our objective is to establish the brand and have satisfied customers. So we have 12,000 customers in India, and it will grow. What we and our dealers have done is to demonstrate that sub-Rs 4 lakh does not mean compromise and stagnation."

But the company's pricing strategy has left many confused. The Go+, for instance, costs the same as the Go. The multi-seater carries a price tag of Rs 3.96 lakh, while the hatchback version costs Rs 59,000 less at Rs 3.37 lakh. This could result in the two cars eating into each other's share. Nissan says its focus is on establishing its network and it is not bothered if sales for the Go+ come at the cost of the Go. "We are developing the network. We are making sure that the team understands the Datsun (brand). We will have a reach of 95 per cent by 2016 and we want to make sure that Datsun is the first brand that comes to one's mind when one is making the shopping list," Cobee says.

In 2010, the Renault-Nissan alliance set a target of grabbing 5 per cent market share by 2014. However, their combined share at the end of last year was only 3.5 per cent, according to SIAM data. Their good run with the Duster has begun to fizzle out with the launch of Mahindra & Mahindra's all-new Scorpio last year. Nissan's Micra, the other car that their hopes were riding on, has also failed to pull customers from Maruti's Swift because of its high price tag.

Ghosn's strategy of forging joint ventures with local business houses to spur growth has also failed to produce desired results. Chennai-based bus and truck manufacturer Ashok Leyland, which got into the car segment in partnership with Nissan, has been struggling to drive sales for its multi-seater van Stile. The Stile, which was based on the same model as Nissan's Evalia, was generating average sales of only 35 per month. The Evalia itself sold average of less than 50 units a month this year. In comparison, the Toyota Innova has average sales of 5,100 units a month.

Ghosn's most ambitious plan perhaps was to rope in motorcycle major Bajaj Auto to develop a low-cost, high mileage car rivalling the Tata Nano. The car was to be priced at Rs 1.10 lakh, with Renault and Nissan together taking care of its marketing and Bajaj looking after its design and production. However, after years of indecision, Renault-Nissan pulled out from the venture and Bajaj went ahead with the RE60, a low-cost taxi.

The setbacks, however, have not dampened Nissan and Renault's ambitions in India. After having pumped in Rs 15,000 crore into setting up production factories and research and development centers in India, the group has committed a further Rs 15,000 crore investment in its India operations.