Joseph Campbell, in his The Hero with a Thousand Faces, explained the making of a hero. The hero starts out ordinary; gets a call to adventure; undergoes severe tests and on survival gets a great boon. After this, he returns to an ordinary life and uses that boon to improve the world. In the past 40 years, the world of business would have produced a handful of leaders who can truly fit the concept of a hero. These would be Lee Iacocca, Jack Welch, Lou Gerstner, Steve Jobs and perhaps Ratan Tata.
And then there is Carlos Ghosn. He is a hero who is still stuck in the ‘call to adventure’ phase. He manages two car companies, one French (Renault) and the other Japanese (Nissan), and has made both profitable. And yet he is passing through his severest test in two markets — India and China — that will determine his legacy. In both these markets Renault, and to a lesser extent Nissan, are non-entities. In China, at least Nissan, in an alliance with Dongfeng Motor, has managed to make some headway, but in India Ghosn has little to show. A man who is known to rescue sinking companies, who can navigate extremely complex alliances can only show the lessons he has learnt.
To be sure, some of those lessons are reflected in his recent decisions. He has a new target for India. “The objective is for both companies [Renault and Nissan], from 2011 to 2016, to reach a 10 percent market share. Why 10 percent? Because this is the average market share we have, globally. Renault and Nissan globally represent 10 percent market share so there is no reason that in India we don’t do the present average of the two,” he says. Ghosn is after the Holy Grail of building a small car, one that will be popular in India. But that will take time. So, right now he is focussing on localisation and rolling off as many different models.
In the past 12 months, both Renault and Nissan have laid out a product strategy of launching five vehicles each by 2013. At the alliance’s manufacturing plant in Chennai, work is on in full swing to execute this, which entails significant amount of work in localising engines and transmission components.
In February 2012, Renault will launch the Pulse, a premium hatchback which is based on Nissan’s V platform, on which the Micra has been built. Another assembly line is being set up to ready the manufacturing of the Duster, Renault’s offering in the entry level sports utility vehicle segment.
Another small car, called the A platform has reached a critical stage where the purchasing team is actively working on building a supplier base.
Nissan, on its part, is working on building a small car especially for India. A sports utility vehicle is also on its way, which the company is building on the ‘Dost’ platform, the Light Commercial Vehicle (LCV) from its alliance with Ashok Leyland. The alliance (Nissan Ashok Leyland) will launch another LCV later in 2012. Ghosn says the goal of the India strategy is to localise more than 85 percent of the products and expand dealer network.
But it is going to take more than just that to achieve a 10 percent market share. Being a marginal player in the country for about four years, he now knows exactly who the alliance is competing against. “We know their products very well, we know the price, we know the engine and you know the name of the game in India is fuel efficiency. That’s No. 1. Price, that’s No. 2 and third is design and functionality. If you come with an offer that is better than the competition, then you have a shot at it. We have nothing [to lose] in India. Here, we are the challengers,” he adds. Much of this confidence comes from the lessons Ghosn has learnt in India.
Demanding Partners
Carlos Ghosn admits Logan, which was Renault’s first foot forward in India, was not its best. “Oh, the Logan was too expensive. Second, it was not sufficiently localised,” he says. Logan was launched in 2007 and the Union Budget of that year changed the duty structure on cars that were more than 4 metres in length. Logan was 4.247 metres long and was taxed at 20 percent, while cars up to 4 metres were taxed at 8 percent. “This was absolutely not expected,” says a Renault India official.
M&M, Renault’s JV partner in the Logan project, wanted the Logan’s length to be reduced to less than 4 metres, but Renault did not agree. “How can you cut a global platform just like that? And we were not sure if that was the only reason the sales were floundering,” says a Renault India official.
M&M was tired of the stubbornness of the French car company. Renault was not sure if M&M’s communication and sales strategy was right.
To make matters worse, negotiations between Renault-Nissan and M&M on the Chennai manufacturing facility was not going too well either.
It seemed that both parties had come to a mutual agreement and the ULC would see the light of day in 2011. Except that it hasn’t. Over the past one year, tempers have been running high at both Renault and Bajaj. Both Rajiv and his father, Rahul Bajaj, have made public statements to the effect that Bajaj Auto is not building a car. “We are very clear that we are building a commercial vehicle that will be shown at the Auto Expo next year,” says a senior Bajaj Auto official requesting anonymity. Internally, Renault officials believe that Bajaj never really wanted to do this project and the silence tactics and media statements were just attempts to buy time.
(This story appears in the 16 December, 2011 issue of Forbes India. To visit our Archives, click here.)
Great to read your article!
on Dec 19, 2011After reading this article,Carlos Ghosn comes across as an International CEO who is struggling to get things right in India.But he is not just another brick in the wall.He has successfully turned around 2 Loss Making Companies into Global Giants and two in every car sold in the world is being made by these firms.His popularity is such that there is a cartoon character based on him in Japan. Can anyone of the so called heroes mentioned at the start of the article boast this. It is only a matter of time before Nissan and Renault become a household name in India .
on Dec 12, 2011