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Business

Nissan's next challenge: grow beyond US, China

Mitsubishi Motors key partner in tapping emerging markets

TOKYO -- Although Nissan Motor is in much better shape than when Carlos Ghosn took over 18 years ago, even the celebrated revival architect could not accomplish everything. The imminent challenge for his successor is to reduce heavy reliance on the U.S. and China by steering the automaker toward emerging markets.

Nissan's management plan ending this fiscal year was highly ambitious, aiming to raise both market share and the automaker's operating profit margin to 8%. But reality has not kept up with these goals: In the nine months ended in December, global market share was just 5.9%. Though Ghosn gained a reputation early on for touting bold commitments and inspiring his employees to meet them, that strategy seems to be at a turning point.

Of the 3.99 million vehicles Nissan sold during those three quarters, some 60% went to the U.S. and Chinese markets. The automaker has pushed the Datsun brand, tailored to emerging markets, to help grow market share in such regions as Southeast Asia, but continues to lag behind rivals there. Bringing balance to this sales mix will be one of the most pressing issues facing Hiroto Saikawa, Ghosn's successor, when he takes over as CEO on April 1.

New markets

This is an unsteady time for Nissan's U.S. operations. President Donald Trump has pledged to renegotiate the North American Free Trade Agreement with Mexico and Canada, and has called for the creation of a border adjustment tax, which would lighten exporters' tax burden while making life tougher for importers. This could deal a stiff blow to the Japanese automaker, which makes around 25% of the cars it sells in the U.S. in Mexico. That figure is higher than for many of Nissan's peers.

Becoming less dependent on the U.S. market will require cultivating business in emerging markets -- a task for which Mitsubishi Motors, in which Nissan holds a 34% stake, could be an invaluable partner. Mitsubishi has both plants and solid brand power in countries such as Indonesia and the Philippines where Nissan has struggled to build its share of the market.

Nissan and Renault are also working to bring Russia's largest automaker AvtoVAZ back up to speed as a sluggish economy weighs on vehicle sales in that nation. The pair hold a majority stake in AvtoVAZ.

Distractions

But trouble is brewing elsewhere. Marine Le Pen, the leader of France's far-right National Front who has called for a national referendum on leaving the European Union, is gaining in that country's presidential race. There is also concern that the French state, which holds around a 20% stake in Renault, could become more involved in the automaker's management.

A leadership transition at Nissan now could give the automaker and its allies "room to deal with this type of situation," said Katsuhiko Shimizu, professor at Keio University's Graduate School of Business Administration.

Nissan will also need to boost its offerings' appeal. The company aims to have sold a cumulative 1.5 million electric vehicles through its alliance with Renault by the end of this fiscal year. But sales of Nissan's Leaf have come to just 250,000 units. Even adding electric vehicle sales at Renault and Mitsubishi brings the total to a little more than 400,000 units. Meanwhile, Nissan's high-end Infiniti brand is struggling to gain name recognition outside the U.S.

(Nikkei)

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