New Delhi fashion designer Rebecca Nelson is the kind of customer Nissan Motor (7201:JP) hopes to attract as it revives the Datsun brand: someone on a tight budget looking to buy her first car. Problem is, she’s never heard of the long-dormant auto line. “What is Datsun?” asks the 26-year-old, who earns about $400 a month and takes the subway to work. “If I’m spending my savings on a car, I’ll opt for a tried-and-tested brand.”
Nissan is resurrecting the Datsun marque after killing it in 1981 in favor of the automaker’s namesake brand. Sold mostly in North America and Europe, Datsuns were popular for their fuel economy during the 1970s oil shocks. Now Nissan Chief Executive Officer Carlos Ghosn thinks Datsun has a future in emerging markets, where he’s betting updated technology and bargain prices can overcome the lack of brand recognition.
The first Datsun model will be unveiled by Ghosn in India in July and go on sale in 2014. Sketches released by Nissan show a five-door hatchback with a hexagonal grille and swept-back headlights. Nissan says the car will cost “significantly lower” than 400,000 rupees ($6,650). Within two years, the carmaker expects to roll out the brand in Indonesia, Russia, and South Africa.
The new Datsun fits Ghosn’s strategy of competing in every market segment in high-growth developing economies. Its role is to occupy the opposite end of the price spectrum from Nissan’s upscale Infiniti unit, which is being revamped to lure wealthy Chinese buyers. “Without Datsun, the automaker will find it difficult to grow fast in emerging markets,” says Ammar Master, an analyst at LMC Automotive in Bangkok.
Ghosn could use a strategic win: His $5 billion bet on electric vehicles in 2009 has fallen short of targets. Nissan in January cut prices for its all-electric Leaf after missing sales goals in the last two years. “He has to pull some rabbits out of the hat,” says Ed Merner, president of Atlantis Investment Research in Tokyo. “He hasn’t pulled out any for a long time. Has he no magic anymore?”
In developing countries such as India, Russia, and Indonesia, Nissan doesn’t offer passenger vehicles in the lowest price ranges, which account for about 40 percent of the car market there, Ghosn said last year when he unveiled his plans for Datsun. The resurrected brand will allow the company to reach a new market segment: first-time buyers upgrading from motorcycles or used cars. Ghosn figures that the Datsun name, even if it’s unfamiliar to consumers in emerging markets, beats starting a new brand. “The risk is to do nothing,” he said last year.
The Datsun line will be home to the automaker’s budget vehicles. The idea is to prevent the main Nissan brand, whose top-selling Altima sedan starts at $21,760 in the U.S., from going downmarket. Nissan is adopting a similar strategy that Renault (RNO:FP), which Ghosn also heads, used with the low-cost Automobile Dacia brand in Europe, according to automotive analyst Master. Roland Buerk, a spokesman at Nissan’s headquarters in Yokohama, says Datsun will account for a third to half of the automaker’s sales in India, Indonesia, and Russia by 2017.
Ghosn will probably use older vehicle platforms and Nissan’s dealer network for its Datsun models to keep costs low, says Kota Yuzawa, an auto analyst at Goldman Sachs Group (GS) in Tokyo. “It doesn’t really require a lot of investment,” Yuzawa says. Chris Keeffe, a Nissan spokesman, says the automaker doesn’t comment on the specifics of future products, adding that the newly developed Datsuns use “state-of-the-art technologies, platform, and components.”
Datsun can expect stiff competition. Maruti Suzuki India’s Alto 800 and the Eon by South Korea’s Hyundai Motor (005380:KS) both cost less than $5,000. Nissan’s cheapest car in India now, the new Micra compact hatchback, runs about $5,800. At least 10 other manufacturers, including Toyota Motor (TM), Ford Motor (F), and Volkswagen (VOW:GR), also sell compacts and minicars, which accounted for about 75 percent of passenger-car deliveries in India last year.
Jakarta resident Arie Novarina, who rides a motorcycle to work, illustrates the difficulty Datsun will face even if it succeeds in India. In Indonesia, Toyota and its affiliate Daihatsu Motor (7262:JP) account for about half the passenger-vehicle market, according to researcher IHS Automotive (IHS). As Novarina considers upgrading to a car, the 31-year-old says she’s most interested in a Toyota and will consider a Datsun only if it’s easy to handle, gets good gas mileage, and, most important, is cheap. “Datsun’s design looks cool,” Novarina said after viewing a sketch of the soon-to-be-released Datsun hatchback. “But if it’s the same or similarly priced, then I’d choose Toyota.”