The Hindu Business Line : Green, compact cars the way to go, says Ghosn

From the global car industry’s point of view, 2010 will be the year of stability and not recovery, believes Mr Carlos Ghosn, Chairman and Chief Executive Officer of Renault-Nissan.

“The automobile industry is getting better because the financial crisis is behind us but the recession is still there. India could be an exception like China but this is not true for the rest of the world,” he said.

Big markets such as the US, Japan, France and Spain were having a tough time and, overall, global car sales had been falling from 67 million vehicles in 2007 to 62 million in 2008 to an estimated 60 million units in 2009. The year 2010 could also end flat at 60 million units.

Mr Ghosn was interacting with faculty and students of the Indian Institute of Technology Delhi earlier this week where Business Line, as a print publication, was exclusively invited to the event. He was in India to participate in the World Economic Forum’s India Economic Summit.

Renault-Nissan, like other global carmakers, was under intense pressure during the post-Lehman crisis and did its bit to cut costs, investments and inventories while simultaneously planning to increase sales and investments in promising, new growth regions. “We now need to prepare for the long-term,” Mr Ghosn said.

It is in this context that the company has decided to focus on four areas. The first is environment-friendly technology and zero emissions. “We will get into affordable, mass market electric cars and will be the first to do so,” he added. Renault-Nissan is building 500,000 electric cars in 2011 and Mr Ghosn said the biggest advantage lay in the fact that it was making the battery in-house unlike other companies which were buying it from others.

The second priority is to strengthen the focus on global, compact cars “which is the way forward”. The third is to build a presence in emerging markets which hold the key to the future, unlike the traditional US and Japan markets. According to Mr Ghosn, while the BRIC (Brazil, Russia, India and China) economies were the critical growth drivers, there could be other countries waiting in the line. “Maybe, they could be Mexico, Vietnam or Indonesia and some others,” he said. It is here that the next wave would be critical with bigger challenges in sourcing and brand building.

The fourth area of focus for the company is partnerships. “Renault-Nissan will follow this path while keeping separate identities. But we will keep together suppliers, engines and transmissions,” Mr Ghosn said. The business model in India, for instance, has local partners (for Renault and Nissan) in the form of Mahindra & Mahindra, Bajaj Auto and Ashok Leyland for different categories of vehicles.

Battery tech important

It is in the area of battery technology where he said joint research could be contemplated with top institutions such as the IITs. “I would be very interested in any battery project which is simple and affordable. I would encourage focus on a low-cost battery which can go into the common car,” he said.

Mr Ghosn also indicated that India was neglecting battery technology at a time when countries such as China and Korea were placing more emphasis on this area. It was his view that electric cars would account for ten per cent of the automobile market in 2020, which translates into new opportunities for countries such as India.

This becomes all the more relevant with oil prices at $80 per barrel at a time when a large part of the world is still in the grip of a recession. Once the recovery process starts, oil would only get dearer.

“All transport depends on oil and all growing countries are major importers. Without oil, the tiger becomes a chicken and transport will be paralysed,” Mr Ghosn cautioned. The other downside to oil is the role it plays in emissions and many automakers are, therefore, looking at other options. The CEO of Renault-Nissan reiterated that government incentives were paramount to making things work in areas such as fuels and new options such as electric cars.