Why Datsun continues to struggle in its targeted markets

Ammar Master | Updated on: Dec 06, 2021

Late to the party? The Datsun redi-Go at its launch in Mumbai in 2016 | Photo Credit: SHAILESH ANDRADE

Right from India to Indonesia and Russia, the brand has fallen woefully short of expectations

“We want no more sections of the market where there is no offer from our company, particularly in the high-growth markets. This is part of our strategy to take leadership in the emerging markets.”

These were the words of then Nissan CEO, Carlos Ghosn, now in jail in Tokyo for alleged financial irregularities, on March 21, 2012, a day after the revival of Datsun was announced.

Nissan relaunched the brand under its Power 88 plan with a goal to participate in 40 per cent of the markets in India, Indonesia and Russia. This 40 per cent was the lower price end of the market in these countries where Nissan had no models to offer.

The plan was impressive but reality has turned out to be something else with Datsun yet to achieve leadership in any of these three targeted regions.

Slow Indian sales

After being in India for four years, the brand’s performance has been less than impressive with sales down 15 per cent year-on-year (YoY) to 34,000 units in 2017. And with a paltry one per cent share of the country’s passenger vehicle (PV) sales, Datsun is not exactly threatening the top players.

Adding Nissan’s volume to this tally enhances the total, but just barely, to 42,000 units, with market share remaining at a mere one per cent of the PV segment. This performance is far below expectations. When Datsun GO was launched in March 2014, Nissan and Datsun targeted a combined market share of 10 per cent by 2016.

Looking back at LMC Automotive’s forecast for the two brands in March 2014, we had predicted Nissan and Datsun’s combined market share at four per cent of India’s PV market by 2016. Even this has not been achieved, which justifiably raises the question: Why didn’t the company hit its target?

Unrealistic goal

To put it bluntly, Nissan and Datsun set an over-ambitious goal — multiplying its market share by ten times in a span of just two years was never going to happen. The aim was to target first-time car buyers in the emerging-middle class, including two-wheeler buyers/owners, with the affordable Datsun brand.

This meant that Datsun would compete head-on against the might of Maruti-Suzuki as well as Hyundai to win these buyers. If Datsun succeeded in hitting its target, it would have made history!

Two, Datsun failed to quickly design and develop more products. Sure the GO was followed by the GO+ soon after, in December 2014. However, its third model, the redi-GO, did not go on sale until May 2016. Datsun has also been late to bring the GO-Cross, which is now being planned for launch by the fourth quarter of this year.

Therefore, its limited product range is not adequate to compete against Maruti-Suzuki’s enviable line-up of 12 PVs. Such is the dominance of the market leader that sales of the Suzuki S-Cross, its lowest selling mass market PV, last year nearly equalled Nissan and Datsun’s combined tally in 2018!

Neither can Datsun rival Hyundai’s squad of nine models — with the Eon, the Verna and the Xcent each selling more than 40,000 units last year. Further, as aggressively as Datsun promoted itself as an ‘affordable’ brand, many potential buyers perceived it as a low-cost (read cheap) offering under the Nissan umbrella.

This unflattering perception must have kept many buyers away as it did with the Tata Nano some years earlier. After all, status-conscious, entry-level, car buyers did not want their first vehicle to be seen as a cheap model. Closer home in Indonesia, the same consideration may have also been one of the reasons that kept Datsun behind. At flat sales of more than 10,000 units in 2018, Datsun’s PV market share languished at one per cent. More striking is the fact that its sales have shrunk sharply from a peak volume of 29,000 units in 2015.

“Since Datsun brought its first product under the LCGC (low cost green car) project, it became difficult to reposition itself as a non-cheap brand,” explains Titikorn Lertsirirungsun, ASEAN Manager, LMC Automotive.

Datsun’s perception as a cheap brand was further reinforced when buyers started complaining about rusting on the front drive axle and suspension of the GO+ soon after its arrival in Indonesia. The problem occurred because there was no anti-rust coating stage in the manufacturing process. The company soon corrected this, but by then the damage was done.

Indonesia strategy

Nevertheless, Datsun’s strategy in Indonesia was a sound one. It entered the market under the LCGC program (which provided tax benefits and allowed competitive pricing) in the biggest segment with the GO+ MPV. At launch, the GO+ was the only MPV in the LCGC program. The lower pricing through tax benefits thus allowed Datsun to win first-time car buyers.

Its strategy in place, Datsun again had high expectations: At launch, it aspired to sell 40,000 vehicles by March 2015. However, its actual sales stood at 28,000 units by that period.

As is often the case, the new brand suffered a death blow when the market leader entered the race. In July 2016, Toyota started selling its LCGC MPV, the Calya, and buyers rushed to purchase it. The model ended 2016 with a volume of 48,000 units, overshadowing the GO+ tally of a little over 17,000 units.

Another factor that limited Datsun’s growth was the slow expansion of its retail network. Since its entry, Datsun today has 100 dealer outlets across Indonesia. By comparison, Wuling, which started selling its vehicles in the second half of 2017, already has 90 dealer outlets. This helped the newly launched Wuling brand to sell 17,000 units in 2018, which is higher than Datsun’s volume.

In Russia too, sales were initially fairly promising when the brand was first launched in late 2014. Datsun’s volume reached 32,000 units in 2015 to account for a market share of two per cent. At that point, the company announced that it was looking to triple sales and double its market share.

It has been far from successful with that aim though; sales dropped sharply, by 41 per cent YoY, in 2016 at a time when Russia’s total PV sales fell by 12 per cent YoY. Consequently, Datsun’s market share declined sharply that year.

There was a small recovery in 2017 but then both sales and share dropped back again in 2018 to end the year with 21,000 units for just over one per cent market share in the PV segment.

To some extent, given that Nissan has largely pulled out of the conventional (saloon/hatchback) B and C segment of the market by stopping local production of the Sentra/Tiida a couple of years ago and just recently the Almera, we might have expected Datsun to benefit to some extent. But this doesn’t seem to have happened.

Competitive market

“This corner of the market is very competitive and other brands — which include Lada, Chinese brands, Kia and Hyundai — appear to have been more successful in taking up the slack,” notes Carol Thomas, Central and Eastern European Analyst, LMC Automotive.

There are some question marks about the future of some Chinese brands in Russia (Chery, Lifan) as there is no guarantee that local production will continue, so this may provide some limited opportunity for the Datsun brand.

While the timing of the launch of the brand was unfortunate given that it took place just as the Russian market turned sharply down, Datsun’s falling market share story also reflects the fact that the share of conventional cars has been shrinking steadily in Russia to the benefit of SUVs/crossovers.

“It is difficult to survive in Russia without an SUV and the expected launch of a Datsun crossover will help in this respect,” adds Thomas. Naturally, Datsun is here to stay.

Its journey in India, Indonesia and Russia is far from over, but the brand will need to address its many shortcomings in emerging markets to make any kind of impact.

At the same time, spiralling aspirations of first-time buyers (especially in India and Indonesia) coupled with a wider choice of models at affordable price points begs the question if the relaunch of the Datsun brand may be a case of too little too late.

Mr. Ghosn, however, disagreed to this very question back in 2014. “Are we late? You’re never late to do the right thing,’ he had said. It remains to be seen if his optimism will rub off on the brand as it gets set to take on new mobility challenges in a rapidly changing world.

The writer is Senior Manager, LMC Automotive, Bangkok

Published on February 21, 2019
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