How Datsun tried to capture the Indian market before finally bowing out
How Datsun tried to capture the Indian market before finally bowing out
With Datsun redi-GO's production ceasing at the Chennai plant, Datsun's second lease of life in the country has come to a halt. Experts say they focussed so much on the price that they misjudged the market
Manu Balachandran is a writer for Forbes India, based in Bengaluru. At Forbes India, Manu writes on automobiles, aviation, pharmaceuticals, banking, infrastructure, economy and long profiles among many others. He also moderates many of Forbes India's CEO and CXO events and hosts Capital Ideas, a podcast on the most riveting success stories from the business world. He has previously worked with Quartz, The Economic Times and Business Standard in Mumbai and New Delhi. Manu has a master's degree in journalism from Cardiff University and a degree in economics from the Loyola College. When not chasing stories, he is most likely obsessing over Formula 1 (Read: Lewis Hamilton), historical events and people, or planning long weekend drives from Bengaluru
A file photo of Carlos Ghosn, CEO of Nissan Motor Co., with the company's new Datsun Go vehicle at a media event in Gurgaon, India, July 15, 2013. Nissan unveiled its first model under the revived Datsun brand, a five-door hatchback, targeted at weaning budget buyers from Maruti Suzuki India Ltd. and Hyundai Motor Co. in Asia’s third-biggest car market.
Image: Prashanth Vishwanathan/Bloomberg via Getty Images
Nissan has had a phenomenal year-and-a-half. Through the course of 2021, the company rediscovered the Indian market and saw its sales nearly triple—from 12,297 vehicles in FY21 to 33,684 cars in FY22. Much of that is thanks to the company’s recent launch, the Nissan Magnite, a compact SUV that had set the booking charts on fire and garnered bookings of over one lakh vehicles to date. Today, the company sells two SUVs, the Magnite and the Kicks, a mid-sized SUV, apart from its globally admired GT-R.
However, long before the company managed a turnaround in its fortunes, it had tried to capture the Indian market using the Datsun brand—launched with much fanfare in 2014. A low-cost vehicle meant for emerging markets, the brand was revived after two decades to capitalise on the small-car boom in India. The company had launched its entry-level car, Datsun Go, priced between Rs3.12 lakh and Rs3.7 lakh in the country.
At that time, Carlos Ghosn, the then-CEO of the Renault-Nissan alliance had said that the plan for Nissan was to target 10 percent of the Indian car market by 2016 from 1.3 percent then, and Datsun was key to that. “By 2016, we expect 50 percent of all auto sales to take place in high growth markets. To put the global markets in perspective, in the US, there are about 800 cars per 1, 000 residents, among mature European markets, it is around 500, in Russia, the rate of ownership is 280, in South Africa it is 160, in Indonesia it is 70 and in India, it is 15,” Ghosn said. “We see a significant opportunity in these growth markets where demand for cars is increasing and will continue to increase.”
But that wasn’t the case to be. Eight years later, on April 20, Nissan pulled the plug on the brand. “Production of Datsun redi-GO has ceased at the Chennai plant (Renault Nissan Automotive India Private Ltd),” a spokesperson for Nissan India said in a statement. “Sales of the model continue. We can reassure all existing and future Datsun owners that customer satisfaction remains our priority, and we will continue to provide the highest levels of aftersales service, parts availability, and warranty support from our national dealership network.”
Nissan’s decision to pull out Datsun from the Indian market comes a few months after Ford decided to pull the plug on the Indian market. “As part of its global transformation strategy, Nissan is focusing on core models and segments that bring the most benefit to customers, dealer partners, and the business,” Nissan says. “In India, this includes the all-new, locally-produced Nissan Magnite with over 100,000 customer orders to date.”
The decision to focus on segments, away from the low-cost segment, is also a testament to India’s changing automobile landscape where even the likes of Maruti Suzuki are being forced to rethink their strategy on small hatchbacks, to focus more on the lucrative SUV market which has grown phenomenally in the past few years. FY22 saw the SUV segment (including MUVs) registering more sales than the combined sales of hatchbacks and sedans for the first time in the country.
“Their strategy was spot on,” says Puneet Gupta, director for automotive forecasting at market research firm S&P Global Mobility. “Car penetration in India remained low, and their focus was to give wheels to India and tap the lower segment of the pyramid. What they failed at was at understanding the Indian consumer and bringing a product that satisfied them. In effect, it was the failure of the product.”
Prince Chichibe, brother to Emperor Hirohito, is shown sitting in a Datsun at the Japanese Industrial Association Plant in Yokohoma, December 1934. Datsun, a car line of the Nissan Company, was one of Japan's most successful mass produced cars. This was Japan's challenge to occidental manufacturers--a tiny automobile to sell for less than the lower priced American cars.
Image: Bettmann / Getty Images
Datsun launched its operations in India with the Datsun Go, an entry-level hatchback, and soon turned to manufacture two more models, the Datsun Go+ and the Datsun redi-Go. Datsun Go+ was a station wagon, while the redi-Go was a low-cost entry-level hatch, priced cheaper than the Go.
What went wrong?
Datsun was revived by Ghosn and Nissan in 2013 as part of the group’s larger strategy to target the entry-level segment. While Nissan would target the mid-segment and Infiniti range would cater to the luxury segment, Datsun was the group’s tool to target emerging markets.
“Datsun is part of the heritage of the company,” Ghosn had said in 2013 while reviving the brand. “Why do I want to do something new if I can use the heritage of Nissan, which is long? Datsun is a good name. Datsun is part of the history of Nissan, and Datsun has been part of the strength of Nissan. A modern Datsun, a revived Datsun, a Datsun of the 21st century compared with the Datsun of the 20th century. Datsun was known as a product, which was robust, reliable, and affordable. We're going to add to its quality and we're going to add to its modernity.”
Datsun originally began operations in 1911 founded by M Hashimoto who, by 1914, had completed work on a small two-cylinder 10-horsepower car. Hashimoto had manufactured the vehicles through his company, Kwaishinisha, and the vehicle was named DAT, after the surnames of his three investors. Later, Kwaishinsha merged with the Jitsuyo Jidosha Co, Ltd to form the Dat Jidosha Seizo Co and went on to produce military vehicles. By 1931, the company developed a new passenger car, more compact than the original DAT, named Datson, meaning the son of Dat. Eventually, it was renamed Datsun, since son meant loss in Japanese.
The same year, Dat Jidosha Seizo Co became a subsidiary of Tobata Foundry largely because the makers were looking to mass-produce cars and Yoshisuke Aikawa, a powerful businessman of the time and the owner of Tobata Foundry, swept in to purchase the company. By 1933, Jidosha Seizo Co was established by Aikawa, and by 1934, it was renamed Nissan with Aikawa as its chairman. From the mid-1950s until 1986, Datsun had a remarkable run across 190 countries, before Nissan decided to discontinue the brand. The vehicles were known for their sporty, fuel-efficient models with models such as the Bluebird and the 240Z.
It was only in 2013, under Ghosn, that the brand finally made a return, this time targeting emerging markets such as Russia, Indonesia, South Africa and India, among others.
In India, the carmaker had targeted the lucrative sub-Rs4 lakh price category where its rivals included the popular Maruti Alto 800 and the Hyundai Eon. The Japanese carmaker, however, offered more power and space among the vehicles. But nine months after the much-celebrated launch, the Global New Car Assessment Programme (Global NCAP) recommended that Nissan pull out the Datsun Go from the Indian market in addition to other global ones after it failed safety tests.
“It is extremely disappointing that Nissan has authorised the launch of a brand-new model that is so clearly sub-standard,” Max Mosley, Global NCAP Chairman, said in a statement. “As presently engineered, the Datsun Go will certainly fail to pass the United Nations’ frontal impact regulation. In these circumstances, I would urge Nissan to withdraw the Datsun Go from sale in India pending an urgent redesign of the car’s body shell.”
Since then, the carmaker struggled to build up a base in India and sales were only a fraction of what the carmaker had planned. In the meantime, Ghosn, the man responsible for reviving the Datsun brand, left the company. In all, the company sold some 500,000 units of the Datsun globally and last year—between January and December 2021—Datsun sold some 4,000 units in the Indian market.
“Datsun as a brand was focussed on compact cars which is a highly hypercompetitive market in India,” says Harshvardhan Sharma, head of auto retail practice at Nomura Research Institute. “In order to unlock the financial viability of small cars in India, one must be looking at high sales volumes and optimisation of costs (localisation). I think the cost pressures and volume balancing are key here which might be challenging for any new entrant to sustain.”
In addition, the focus on keeping prices low also meant that the company had to cut down on many offerings, including basic equipment, and using poor plastic. “The products were definitely in line with the competition, and they did a good job of keeping costs down,” adds Gupta. “They also had good reach. But the product simply failed to create any excitement and perhaps that’s because they never took the Indian consumer seriously. They focussed so much on the price and misjudged the market.”
In many ways, Datsun’s fortunes are akin to Tata Nano’s—launched with much fanfare, but failed to live up to expectations after misjudging the Indian consumer who was looking for better features in vehicles. “To some extent, we can say the story is similar across both the products,” says Gupta. “While one was in the mini-car segment, the other was in the sub-compact category. But Tata came back stronger with a focus on safety and a great product line.”
In the meantime, as India’s automobile sector underwent a transition, with the government also proactively involving itself in safety and other emission norms, it meant that the likes of Datsun were only going to have a hard time keeping their costs under check. “When Datsun came to India, the average price of the vehicles in India was around Rs3.5 lakh,” Gupta says. “That has now gone up to Rs7 lakh, largely because of rising income. The Indian customer is willing to pay more which means that they may not be willing to purchase Datsun.”
The decision to stop producing Datsun will also give Nissan adequate resources to draw up its India playbook. “In India, the locally-produced Nissan Magnite has over 100,000 customer orders to date. It is a very successful product,” adds Sharma. “At the same time, one can imagine that running multiple brands may come with its own set of challenges… however, there might be synergies and sharing of resources across the brands.”
Then there is the decline of hatches and sedans in India over the past few years which has come to hurt India’s largest carmaker, Maruti Suzuki, that is now firming up plans to make a strong entry into the segment. By Maruti Suzuki’s assessment, the market now accounts for about 39 percent of all car sales, which is only expected to grow to some 50 percent in the next few years. That means, one in every two vehicles sold in the country will be an SUV. That means the likes of Datsun have no place in the Indian automobile landscape.
“We may continue to see a mix of mass-premium products in the India portfolio from OEMs,” adds Sharma. “Indians today are looking for a balancing act between cost and convenience, and hence, may not be skewed to low-cost vehicles only. There is an abundance of credit in the market and hence we may continue to see customers ‘upgrading’ across the variant ladder.”
With India now pulling the plug, Datsun’s second lease of life has finally come to a halt. And with it a near-century-old legacy.