Carlos Ghosn (15) A delayed but fortuitous China entry
An unexpected partnership with Dongfeng helped Nissan tap a burgeoning market
Nissan Motor was slow to make a full-scale entry into what has become the world's largest auto market: China. We had been there for 30 years and produced Nissan's first Cedric model for the Chinese market. But it was in 2000 that we started to realize the true opportunities. At the time, there were 1.2 billion people in China buying only 2 million cars a year. That's 10 cars per 1,000 inhabitants. In Japan, there were 600 cars being sold per 1,000 inhabitants. At a certain point, the Chinese market was going to boom.
Toyota Motor and Honda Motor had already made their moves into China in the 1990s, but because of Nissan's necessary restructuring, our plans had been delayed. But there were plans. In February 2000, just before the Nissan Revival Plan was launched, I met with Toshiyuki Shiga, who was in charge of corporate planning (he would later become chief operating officer) and told him to start preparing plans to expand into China. The market was still in its infancy, but we knew the potential it represented.
I had a chance to meet Wu Bangguo, deputy prime minister of China. I went with the intention of posing many questions to Mr. Wu, but he pre-empted me."Mr. Ghosn, you revived Nissan, and we need some help at a state-owned automaker called Dongfeng. If you were allowed equity participation, would it be possible for you to support the revival of this company?"
I was caught totally off guard. In China at that time, there was a general reluctance to offer any more joint-venture licenses. In fact, in the automotive sector, foreign entities were prohibited from owning more than 50% of capital in a joint venture. But with the support of authorities, we were able to create a deal unlike any other.
The scale of the project had suddenly become enormous, valued at more than 100 billion yen ($851 million at current rates). This posed a tremendous opportunity, not only to open the door to the Chinese market, but also to contribute to the entire business of Dongfeng. It also provided Nissan with the opportunity to catch and even surpass car companies that had been in China for much longer.
So in March 2002, Nissan announced a capital tie-up with Dongfeng, and we began working on this historic new venture immediately. We created a mission team called the Golden Triangle and held meetings every other week to review reports. But as the project grew, we found that a conventional conference style no longer allowed us to hear reports from all of our teams.
I began to hold Friday night meetings with Shiga-san and a handful of other team members at an Italian restaurant near my house. I usually don't work too many late evenings, as I reserve those hours for family, but this required extra effort. After we finished our plates, I let the questions fly. Our primary concern was not the financial situation of Dongfeng, but whether we could achieve a real partnership.
In the end, things went well with Dongfeng executives. We established a strong relationship with Mr. Miao Wei, who was chairman at the time, and with Mr. Xu Ping, his successor. One of the reasons for this rapport was because the Chinese people had a deep respect for Japanese products. Dongfeng also benefited from Nissan's global management expertise. In return, Nissan was able to leverage Dongfeng's local assets, so we weren't starting from scratch. It wasn't risk free, but it was an important part of our strategy.
Today, our sales in China are a significant contributor to our global totals. And we see tremendous opportunity for low- and even zero-emission vehicles to be developed in the Chinese market.
On a personal note, after visiting China several times, I learned how to write my name in Chinese characters. I was completely fascinated by these characters and practiced them privately in my free time.
Carlos Ghosn is chairman and CEO of Nissan Motor Co., Ltd.
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