The Hindu Business Line : Carlos gone on India

Mr Carlos Ghosn, President and CEO of Renault and Nissan, has made it clear that the future of both the companies depends on having a strong presence in the Indian market.

Mr Carlos Ghosn (pronounced like `bone') is the rock star of the automobile industry. He is the maverick turnaround artist who is credited with pulling Nissan Motor Company of Japan out of a quagmire of losses.

Born in Brazil, raised in Beirut and educated in France, a true global-citizen, Mr Ghosn, now spends his average workweek in three countries — France, Japan and the US. As the President and CEO of two companies — Renault of France and Nissan of Japan — Mr Ghosn is a unique chief executives in the automobile industry.

With such credentials, it is no wonder then that the automotive world listens carefully to anything he has to say.

So, when he showered praise on India's low-cost manufacturing abilities last week, it made headlines here, but it must have also reached the ears also of those that don't have a presence here yet.

Other CEOs and presidents of global automobile companies have lauded the low-cost engineering abilities of Indian automobile companies in the past, but none has been as effusive as Mr Ghosn.

Action man

Mr Ghosn is said to be a man of action and when he fixes his companies' strategy, he is known to expect results quickly. It showed in the speed with which Renault allied with Mahindra & Mahindra (M&M) and with the earlier-than-expected commissioning of the Logan assembly line at the latter's plant in Nashik.

The whole rationale for Renault and Nissan coming to India hardly needs reiteration. The possibility of cost savings by manufacturing in India is the reason why this country is such a draw among multinationals in both the services and manufacturing sectors. And, Mr Ghosn's special mention about Indian frugality is not so significant when applied to local manufacturing for the domestic market.

But the comment bears far greater significance to those who haven't recognised the opportunity that India represents as a potential global automotive manufacturing base.

Cost saving

Speaking about the success of the alliance between Renault and M&M at the latter's Nashik plant, Mr Ghosn said, "There is a fundamental difference in attitude to cost savings between western companies and Indian companies and this is what we want to capture with this partnership." Mr Ghosn feels that the Indian attitude to containing costs has come from their history of operating under conditions of scarcity.

Talking about the culture of low-cost Indian manufacturing, Mr Ghosn said that Indian companies could show companies from the developed markets the way with their frugality in manufacturing and management. "This trait is unique to many Indian companies such as Mahindra, Tata Motors and Bajaj. We (Renault and Nissan) want to use the Logan project to learn about India and the potential of an Indian company in enabling low-cost manufacturing," he mentioned.

Speaking about the sourcing advantages that Indian suppliers offer, Mr Ghosn said that on average the cost of components manufactured in India is about 30 per cent cheaper than similar parts made in Europe or in Japan.

But the ultimate compliment from Mr Ghosn for low-cost Indian manufacturing in the automobile industry came when he mentioned that it is very difficult to develop a global low-cost, frugally manufactured passenger car platform without getting into an association with an Indian company.

He felt that the sense of definition of the product and the understanding of the market that a dynamic Indian manufacturer brings to the table make it an attractive proposition to ally with companies here.

Indian market, the key

The CEO of the Renault-Nissan combine also said that to be a serious competitor in India, the cost of the vehicle has to be kept within $3,000. He also made it amply clear that the future of both Renault and Nissan depends on having a strong presence in the Indian market.

Naturally, there is much speculation about whether Nissan, which is the more popular small-car manufacturer of the two in the alliance, will go down the price segmentation to the level of introducing an entry-level small-car in India.

The competition won't put it past Mr Ghosn, the wizard whose unique approach to discovering new markets and strategies has paid rich dividends for the Renault and Nissan alliance.

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