Datsun 'Goes' For Alto Customer

Datsun, a major competitor to Maruti and Hyundai, has finally premiered its hatchback “Go” in Hyderabad. The new Datsun Go will hit the market this summer and is estimated to cost less than Rs 4 lakh as the on- road price for its top-of-the-line range. The base range is estimated to be as low as Rs 2.85 lakh as the on-road price. This will add new buyers to the A, Aplus and B segment which sells 1 million cars annually and forms 50 per cent of the car market. Datsun has built this car for India, 95 per cent of the components are local, and has done so by working with 130 suppliers. The only part which is imported is the ECU chip that goes in to the entertainment module and the tachometer. So while the passenger car market has not grown this financial year, growing at negative rate of 6 per cent, Nissan has cleverly bet that the Datsun can sell at least 5000 cars a month for the fiscal year 2014-15. It, however, does not want to commit on the numbers. This is easily achievable as the cost of ownership of the car is compelling with its pricing.

 

“Our target segment is a 34 year old who earns Rs 30,000 per month and is willing to pay Rs 5,000 per month as the loan instalment,” says Koichiro Okamoto, Manager Product Planning, Datsun Business Unit of the Nissan Motor Company. He believes that the total cost of ownership was very important and expects to keep the yearly cost of maintenance to Rs 4,000 per year.

 

When the Datsun was pulled out of the USA in 1981, by Nissan, the great middle class story of the USA was at an end.  Most Americans had bought cars before the banking crisis, of the early eighties, kicked in to start an economic spiral that only ended with the Lehmann Crisis in 2008. In the same year India was growing at an average of 8-9 percent and global automobile corporations, who were bleeding in the USA and Europe, hailed the growth of the Indian middle class as the next corporate market. The market has only slumped since and is growing at a snail’s pace. In 2010-11 when car sales grew by 15 per cent, selling 2.5 million units,money flowed in from all corners of the world. In that same year the A and B-segment grew by 30 per cent.  

 

Renault Nissan committed Rs 4,300 crore, Volkswagen committed Rs 4,000 crore and Ford invested an additional Rs 4000 crore as investment towards meeting the requirements of the surging Indian middle class. Large manufacturing bases were set up and then came something unexpected and numbers went wrong. Indians did not buy cars like the companies expected. The industry grew by only 3 per cent over the next couple of years. This year the industry will barely grow by 2 percent while passenger cars continue to slump and is expected to see a slump till 2015. However, with a low base Nissan will use its 115 strong sales network and 80 pop-up sales units, like the ones in shopping malls, to boost sales of the Datsun to at least 60,000 units. More importantly they will guarantee the life cycle of the product and try to win new customers. The urban Indian, who earns Rs 30,000 per month as his salary, is the key for the brand. There are 47 Indian cities that have a population of more than a million. “This car is not built to look like a bottom end car, it is for the strivers across India and it has a lot of good features at a great value,” says Kazayuki Yamaguchi, Chief Vehicle Engineer at Renault Nissan Technology and Business Centre India Private Limited.

 

There remains a caveat for the car manufacturers to relook at India’s growth. The National Council of Applied Economic Research says that there are more than 150 million middle classes workers in India. However there is no clear evidence as to what really is the definition of the middle class in India. The potential car buying middle class segment can be less than 10 per cent and hopefully, for car manufacturers, economic activity will permit the rise in per capita incomes for individuals to buy cars.On a four year average 8 million two wheelers sell on aannual basis. 

 

Even if 25 per cent of this population earns Rs 30,000 per month and comes from these 47 cities then the market for cars is still very large provided the same set of people do not have a home loan or debt repayments, which will substantially reduce the demand for cars to less than or close to a million units, which is the four year annual average sales for the A and B segment cars. The numbers still favourMaruti Suzuki and Hyundai because of the sheer legacy of service centres and dealerships. Maruti has close to 1200 dealerships and Hyundai has over 435. The service touch points of Maruti are well over 2500 centres and that of Hyundai is 1200 centres. For many other car manufacturers the savior has been exports and they have offset a couple of bad years by steadily increasing that number. 

 

The larger bet for the Datsun brand is to go global. With this car the Renault Nissan Alliance will raise the factory production in Chennai to 400,000 units. Currently the Alliance exports 85 per cent of their products, of the 200,000 production capacity, and expects to produce close to 130,000 cars in Chennai this year. In 2012-13, the Alliance sold close to 188,000 cars, 60 per cent of those cars were exported to Europe and Africa. The Datsun will be sold in Asia, Africa, Indonesia and other Asian markets.