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Nissan bets on Indonesia to revive Datsun as emerging market brand

Norihiko Shirouzu

JAKARTA (Reuters) - Nissan Motor Co considers Indonesia key to its bid to resurrect Datsun next year - a brand name retired in the early 1980s - as a sub-$10,000 no-frills car to drive growth in emerging market sales.

Senior Japan-based Nissan executive Vincent Cobee believes Datsun will generate annual sales of about 100,000 cars in Indonesia by the year ending March 2017 - half of the overall sales volume projected for the combined Nissan and Datsun brands. Last year, Nissan sold 67,578 cars here, about 6 percent of the 1.1 million new cars sold.

"In every country we go to, we expect Datsun to be a third to one half of Nissan's overall sales. In Indonesia, it's more the latter. My personal ambition is to generate half here," Cobee said in a recent interview in Jakarta.

The 44-year-old French-born executive in charge of the Datsun project, was in Jakarta late last week to review the company's efforts to develop a local supply for parts and to start producing two Datsun models, which are due to hit showrooms next year.

Nissan announced last year that Indonesia was one of three markets, in addition to India and Russia, where it would relaunch Datsun. The country has a population of about 240 million whose disposable income is rising fast in an economy showing continued growth.

By 2030, an additional 90 million people will have entered its consumer class, more than any other country except China and India, research by consulting firm McKinsey & Co shows.

Indonesia looms as a particularly compelling fit for Nissan's ambitions with Datsun, Cobee said, because the government appears poised to implement crucial policy support.

The policy would eliminate certain tax burdens to boost demand for what the Indonesian government calls "low-cost green cars" (LCGC). It aims to ignite demand for no-frills cars priced, some industrial officials say, around $8,000 (5,149 pounds) - exactly the kind of cars Datsun is currently developing.

Nissan has estimated the LCGC policy, if implemented, would likely lift Indonesia's car demand over several years by 30 percent. The increase could be as much as 40 percent to 50 percent, Cobee said.

To qualify for the tax breaks, carmakers are likely to be required to come up with models of certain price levels and fuel efficiency, and which include local content. Though the policy is not yet finalised, the government has indicated consumers buying LCGC cars would be exempt from a "luxury goods tax" of 10 percent currently levied on most automobiles.

Toyota Motor Corp. and its affiliate Daihatsu Motor Co. (Other OTC: DHTMY - news) and their local partner Astra International (Other OTC: PTAIY - news) are likely to start selling their own LCGC cars as early as this year.

Datsun was a global brand name, with a history dating back to the 1930s. In a move still deemed one of the worst decisions in automotive marketing history, Nissan stopped using the name in favour of Nissan to unify corporate identity.

Last year, Nissan said it would revive the brand name as a marquee for emerging markets, starting with India, Russia and Indonesia and eventually expanding elsewhere in Southeast Asia and to Latin America, the Middle East and Africa.

According to many industry estimates, emerging market demand now accounts for more than half of the roughly 80 million vehicles being purchased worldwide each year.

By the end of the decade, demand in the emerging world will likely account for two-thirds of anticipated overall global demand of 100 million cars a year, Cobee said.

"Above all, it's because of the vast emerging swathe of middle-class consumers who are now reaching the pleasure of acquisitions of durable goods," he said.

Those are traits shared by India and Russia, which Cobee said he is counting on to generate similar absolute sales for Datsun.

He said Nissan's confidence in the outlook also stems from its ability to keep Datsun manufacturing costs low, as low as $3,000 to $5,000, which he described as "an ambitious manufacturing cost which we will continuously aim for."

Cobee said some earlier reports that had indicated Datsun cars might be priced as low as $3,000 were inaccurate.

Retail prices for Datsun cars will be higher than that and they will vary from market to market, depending on distribution, marketing and retailing costs, Cobee said.

These costs are likely to add as much as 15 percent to 35 percent to Datsun's manufacturing costs. Still, Datsun cars are likely to be significantly cheaper than most affordable cars in Indonesia, which now sell for as little as about $13,000, he said.

To achieve low-manufacturing costs, Nissan will likely avoid developing new technology. Instead, it will use tried technology, in particular vehicle underpinnings, engines and transmissions, which are costly to develop. It is also likely to pare down expensive features such as power-windows, navigation systems, and extra airbags.

Auto makers over the past several decades have tried to offer more technology for roughly the same price, Cobee said. But for a new breed of low-cost emerging market cars, the Nissan executive is asking engineers to change their mindset: "We're trying to redirect engineering to think: I don't want more; I want the same for less money."

(Additional reporting by Janeman Latul: Editing by Neil Fullick)