Datsun faces the axe in cost-cutting drive

It was launched with much fanfare six years ago but media reports now suggest that Datsun will face the axe as part of Nissan’s cost-cutting drive.

At one level, this is not entirely unexpected given that the brand had achieved little even though it promised the moon at the time of its launch. There was no doubting the strategy of pitching an affordable car for emerging markets; the only problem was that customers did not quite fancy the idea of being associated with a cheap product.

This was precisely what happened with the Tata Nano even while it caught the fancy of the world when it was first unveiled over a decade ago. Being a people’s car was fine but the moment the ‘cheap’ tag became part of the package, nobody really cared beyond a point.

Should Datsun get the boot, it will be a huge setback in markers such as India, Indonesia, Brazil and South Africa where it was pitched as key growth pivot. How Nissan will fill the void is the biggest challenge as the supporting ecosystem of dealers, suppliers and customers will also take a big hit in the process.

Perhaps, the fact that sales have been little to write home about means that the blow will not be so hard but it will still remain a huge setback for the Japanese carmaker. It will also mean a final closure to yet another of Carlos Ghosn’s huge plans even as the former Chairman of Nisan was bullish on its prospects during its launch.

India may feel the heat

India will feel the impact in more ways than one. It is already marked for Nissan’s headcount slashing exercise that will see 1,710 jobs knocked off in the overall plan of 12,500 worldwide. In addition, the removal of Datsun will mean that the company will have to think extra hard of a solution to fill up capacity at the sprawling plant near Chennai. This facility, the first manufacturing initiative of Renault-Nissan, has the capacity to manufacture over 4.5 lakh units but hardly 40-45 per cent is used. Renault has had its share of successes like Duster and Kwid but the challenge now is to make new launches like Triber work.

In the case of Nissan, there was a lot of traction initially to products like Micra but the failure of Datsun has been a tough pill to swallow. A lot of hope was riding on redi-GO but reality turned out be something else in one of the hardest markets in the world for any carmaker.

Optimising the Chennai plant remains the biggest task ahead for the Renault-Nissan alliance and there is more reason, therefore, for the partners to move on quickly and bury the hatchet. The auto market, be it India or many parts of the world, is in the midst of a slowdown and there is no telling how it will last. Facing these headwinds and coming up with a revival plan will be the biggest challenge for Renault-Nissan.

Perhaps the exit of Datsun will also present Nissan an opportunity to reboot its brand and come out with a more cohesive product strategy. The original idea of the two-brand positioning (Datsun and Nissan) to differentiate between entry and premium will no longer be valid. It makes sense especially with the new generation of buyers who would much rather drive around in smart cars and just not a cheap offering.

Emerging markets

It was during the 2017 Tokyo Motor Show when a top official associated with the Datsun brand told this writer that he was hoping it would be a brand of 4,00,000 units or half a million cars by 2023 where India would take a big place along with Russia and Indonesia. He was confident that emerging markets would grow rapidly during this timeframe which literally meant that the sky was the limit.

According to this official, the team was already thinking of the third generation Datsun, which was only logical given that “you cannot think of markets like India for the next three to five years, but 15 years”. After all, this was but natural when it involved a huge population and diverse preferences for a car.

“The Datsun brand will evolve over the years and I am thinking of bigger things,” the official said. “You cannot be confined to a segment as a brand given that there are passenger cars, pickups, crossovers and I am visualising all the possibilities.” For now, all this seems a pipe dream as Datsun gets ready to take its final bow.