Partnership In India Is Different From Other BRIC Countries

Image: Amit Verma

Carlos Ghosn, Global CEO of Renault Nissan

Forbes India: The last time we met, it was at the World Economic Forum in New Delhi two years ago. So much has changed since then. What have you learnt in this time about doing business in India, especially since you’ve begun completely rebooting your strategy here?
Carlos Ghosn: Today, we finally have a clear strategy that we are convinced will be a successful one. When a large manufacturer or a large company comes to a foreign country, it has to learn. No market, particularly no market as sophisticated and as competitive as India, looks like other markets. That means you can’t have the same approach and the same strategy in India that you have in China or in Russia or in Brazil. If you talk about BRICs, the four countries are so different from one another; you cannot have the same approach. You have to learn your way into each one of the countries, if you want to be successful. In India, it took us some time.

As you know, we have built the plant in Chennai with 2,00,000 capacity. Renault and Nissan are moving in with a product line up which will now be extremely adequate to the needs of the Indian market as we see it through tomorrow. Our goal in India is to achieve a strategy of localisation of more than 85 percent of our products, backed by local production, with dealer network also expanding in both cases. The objective in our mid-term plan for both companies from 2011 to 2016 is to reach a 10 percent market share in India. Why 10 percent? Because this is the average market share we have globally. I mean, 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.

Obviously we are starting from very low levels because Renault will be selling 1,500 cars in India this year, which is frankly nothing. Nissan will be selling more than 40,000 cars in India, which represents 1.4 percent market share. We have a little of 1.5 percent market share and we are going to move to 10 percent market share. Obviously, it is very ambitious, competition is very fierce, so it is not going to be easy. It is obviously going to be based on attractive products, well-engineered and well-localised, great service through the dealer network and a local team, both from Renault and Nissan’s side, looking at India as one of the potentially largest markets of the future.

Forbes India: What is your specific game-plan for achieving 10 percent market share?
Ghosh: To achieve 10 percent by 2016 is no secret. You have to have a strong and attractive demand where the market is. And the market is not into 4x4 and large sedans. Sure, they are important segments, but the real market opportunity lies in affordable cars at different levels. This is where our focus will be. Nissan already launched the Micra, which is doing well, and the Sunny is also doing well. Renault has launched the Koleos, the Fluence, announced the Duster and is coming in with the small car also from the same platform from the alliance — the V platform. But you can expect our product line to be more rich and sophisticated in the entry level. We are currently planning and testing many products.

Obviously you are going to ask me about our co-operation with Bajaj, our own internal search, our co-operation with Ashok Leyland. I think we need to know the market to work with as many people as we can and before we come with the right solution for the market. I was extremely pleased to see the co-operation between Nissan and Ashok Leyland with the launch of the Dost, the pick-up truck. A very affordable pick-up truck and the back orders are strong. Here, we’ve hit upon something. So, we need to adapt our offer for these particular segments, which offer a lot of value to our Indian consumers. We are going to come up with a lot of cars.

Forbes India: You have had multiple partnerships in India and there have been quite a few which did not do so well. What to your mind went wrong and how was the experience of working with them?
Ghosn: The Logan? Oh, it was too expensive. The experience was very simple. First, the car was very expensive. Second, it was not sufficiently localised, third, I think the strategy has to be in a certain way or you ask the partner to do the car, develop it and you buy it from him and sell it. Or you do the car and sell it with a partner. You know what I mean. You cannot be in a situation where the relationship with your partner is a little bit vague or a little bit fuzzy or the responsibility is not very clear. Mahindra is a great company and we had a great relationship, but I think it somehow didn’t work because we were learning our way into India. It is always like this. You start and learn and frankly, in this partnership, in a certain way we learnt to find the right way. And again, with Bajaj also we continue to co-operate. As we see it, we asked Bajaj that ‘you’ve got to do the car, you’ve got to engineer it, you got to develop it, you know the Indian market, show it to us! And when you show it to us, we will decide in our opinion [if] it fits or not’.

What I would love to tell you is that it is done. But we need to see the car. You know what I mean. At the same time, we are working on other options because as you know the market in India is extremely rich at the entry level. There are many entry levels, so you can’t come up with one car. You have to have many different cars, different options and there is room, no matter what we develop internally, there is room for a car that we develop with Bajaj, hopefully.

Forbes India: You have struck alliances in various parts of the world. What is it that you found about doing business with partners in India?
Ghosn: A partnership in India is very different from a partnership in Russia or China or Brazil. Frankly, I think it is so much linked to the culture of the country. In India, it is a culture of private and family entrepreneurship. You don’t find it of the same level in any of the other countries. You have very smart people, at the same time extremely family-oriented, proud of their enterprise and would do anything for it. We need to take this into consideration and because of this we need to make sure we have many partners, each one bringing added value to the table. We need to bring to this partner what he is looking for in the relationship. That’s very specific to India.

We have a partner in China — Dongfeng. It is an official partner, with 50 percent stake and doing great. But it is only one partner, we do everything with it. In Russia also, we have a partner, a large Russian company, we do everything with it. It is the same thing in China and Russia. You have a partnership and you have to deal with the governments somehow. Not in India. Here, it is completely private and family.

Indians are usually extremely shrewd and smart businessmen. That’s No. 1, no doubt about it. Two, they are very pragmatic. Three, they are obviously very interested in the Indian market, but willing to go out. For example, in Brazil, the Brazilians are more centred on the internal market, but in India people say, ‘let me be successful here and then we are going to the United States’. That’s their aspiration. They never take ‘no’ for an answer. They say we can make this happen. They have this mentality of creating value out of nothing backed by a remarkably smart workforce.

Now, we are based in India and I am so happy to be here because I don’t want an Indian workforce outside. I want them inside the alliance. That’s the way I would qualify, not always very easy as you can imagine. While there is a lot of pride like this in my company, my brand, I want to do what I think. That’s not very easy and it requires a global car manufacturer to adapt to the mentality. There are obviously many moments of frustration. Nobody has a serious partner without moments of frustration and India is not an exception. But the difference between a successful partnership and a not successful partnership is not the level of frustration. I think it is the same. Successful partnership comes with frustration.

Forbes India: The one partnership which does seem to have worked is with Ashok Leyland. What do you think worked well there?
Ghosn: I’d say challenging spirits and no compromise from one side or the other. Good collaboration and good chemistry between people also helps a lot. And what will help us in India is the fact that at the end of the day, people from Nissan and Renault come to India by asking: What can we learn? How can we benefit from the Indian know-how and the Indian mindset? This is a successful collaboration. Finally we got one! At the end of the day, I don’t take no for an answer. I think this product will go far. Dr. Sumantran [non-executive chairman of Hinduja Leyland] has a lot of knowledge. When he comes to Tokyo and talks to our engineers they listen to him because he knows about the product. He knows what he is talking about.

And it is impressive. You offer the functionality at the lowest price you can succeed. This is a great example about how you can work together…we would have never thought about this product alone. Ashok Leyland would have never thought about this product alone. We come together, we discuss, we want to offer a very frugal (and that came from Nissan) and it was a great idea. And I think the backlog of orders is very strong. That could give us cues to replicate the success.

The big lesson, and you are going to say that I am talking like a broken record, but it is so true and I am proud of the fact that what I said is now being used in the business community. In India, you learn smart frugal engineering. In India you learn smart frugal design. We are learning. That’s why we think we need an Indian product – Indian-engineered. It’s the only way we are going to learn how to integrate this mindset into our product, which can serve the lot of our emerging markets. Emerging markets are not only BRIC. I would say you have a new wave coming. The new wave can benefit a lot from the successful enterprise of using Indian skills and the Indian mindset to imagine smart, frugal products that is going to be successful, in my opinion, into the next wave of emerging markets. We are talking about Indonesia, Vietnam, South Africa, the rest of Africa. We are talking about countries in the Middle East, some countries in Latin America, which are coming through very strongly.

Forbes India: You have been a big supporter of the ultra low cost car, but somehow, so far, the Tata Nano has failed to live up to expectations. Has that forced you to re-evaluate your optimism about this opportunity?
Ghosn: I would say that ultra low cost opportunities is not one product. I am not the best person to comment, but what I would say is that the concept is right. No doubt about it. I am absolutely still convinced about it. Whatever I heard has happened with the Nano is not about the concept, it is about maybe the execution, but not the concept. Again, the Tata group has showed and my friend, the great Ratan Tata, has shown the vision and I was the first one to recognise it when everybody was dismissing it. I said this is real, this is serious and we are going to do this, we are going to try and replicate that. I still consider the concept very strong. It showed a lot of vision of the market and we are going to try and build up on this, not with one car, but with many cars.