Don't want to be a niche car maker: Renault-Nissan

TOP BOSS SPEAKS: Carlos Ghosn says Mahindra did not deliver up to Renault's expectations in India.

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Forbes India: Looking back, auto sales have done much better than people thought largely perhaps because of government-backed incentives. So how is the outlook for auto demand looking?

Carlos Ghosn: I think 2010 is going to be relatively stable as compared to 2009. It's not going to be stable in every country, because in some countries it is going to go up, in others it is going to go down. But globally, we are forecasting — with a lot of facts and data behind it — that 2010 is going to be at the same low level as 2009 and if there is any pick-up we are not going to be able to see it globally before 2011.

Forbes India: The downturn has focussed a lot of attention on the fact that car companies used too much capital. There has been a lot of talk about the decapitalised model. Is the downturn really going to hasten the whole creation of a decapitalised auto company?

Carlos Ghosn: I think the downturn has shown many things for car manufacturers in that we are going to have to change. We are going to have to change taking every single opportunity offered to us. One of them is that we are spending too much money in investments. [While] you cannot avoid developing technology and products, it means car companies are going to come together to develop the same thing. So, instead of each one paying the bill for the development of technology, we are going to be coming together in a way which is very opportunistic in order to share the cost of technology. That's point number one.

And the second is the inventory. You know during the crisis, we all have to reduce our inventory to reduce the need for cash and we are discovering new ways to be able to supply to the market at much lower levels of inventory and I think that's going to stay.

Forbes India: So what therefore are the main capabilities that you focus on as an auto maker? And what do you leave for others to do?

Carlos Ghosn: You know there are a lot of things that we can do but we will not do very well and I can give the example of the ultra low-cost car. I mean if you were capable of doing the ultra low-cost car at the same level of efficiency as other car makers then we would do it by ourselves. But in this case, we recognise this fact that we need an Indian partner who will naturally be able to come to [a] much better solution and be able to put together a solution in a much more efficient way. Now, this Indian partner needs some of our support; some technology, some knowledge, support of any kind to make it happen so we have to recognise when somebody does a better job than us in some particular field you know to do it with them.

Forbes India: Renault-Nissan seem to be lurching from one bad headline to another. Of course, you could blame part of that to a sensationalist media but what is your assessment of your experience in India?

I don't think we had bad headlines; we had interrogation; we had skeptics. You know the media is always teasing you to say that this is not as good as you think etc. And this is a normal game. I think the Logan is a good car and is having good sales, not at the level of our expectation. In fact, the biggest satisfaction is that the people who own Logan are very happy with the car. You know, I don't want to paint the Logan as a failed car. It is a good car but obviously our expectation was much higher than this.

Forbes India: What's the learning? Is it that the Indian market wants a better looking car, a more modern car?

Carlos Ghosn: Frankly, I don't think so. I think the learning is the fact that this car which is a low-cost car in many other countries is not a low-cost car in India. It is not. It is in the middle range or in the upper middle range where in many other countries where we introduced it, it is at best in the mid range if not in the lower range. So obviously we have to accept this.

Forbes India: Is it because of purchasing power parity or because of taxes?

I think the lineup in India is very specific and doesn't look like the lineup in any other [market]. The Chinese offer is different, the Russian offer is different, the Japanese offer is different. So we need to learn also our way coming to India to adapt to product and to develop the product that the Indian people need. For example, the agreement that we [reached] with Rajiv Bajaj for the ultra low-cost car is totally new to the fact that we are observing in India that if you want to become a large contributor to the Indian car market, you have to have a price point which is very competitive and you don't have it so you are going to have to develop it with an Indian maker.

Forbes India: How does the relationship move forward with Bajaj and why has it taken a fair bit of time to get the alignment right either with Mahindra or with Bajaj?