Why Datsun and Nissan is facing huge losses in entire world?
After the exit of Ford from India, there is a fear in the mind of the people that another company might also exit and that company is Honda, but is Honda in such a bad condition? Honda sold a total of 1,34,741 cars in India in the year 2019 But due to the Covid-19 Pandemic in 2020, they were able to sell only 70,533 cars, but if I talk about Nissan, then in 2019, Nissan sold 23,580 cars in India. But they were only able to sell 2,377 cars in the year 2020. India is the huge market for every auto sector industry after China.
This number was equal to the number of cars that many companies use to sell in a month and this happened after they have launched a mass market product. Nissan has suffered not only in the lockdown period. If we look at their sales in the recent months, then they are among the top losers in the market. Their sales have been reduced by 40–50% in comparison to the previous year. And all this is happening in spite of this company manufacturing a sub-4-meter and a compact SUV.
The segments which are most demanding in the Indian market and according to this, Honda is not at all in a bad condition in the market. The brand on which we should focus more is Nissan. Now you can say that this company might also be suffering due to the heavy taxes imposed on cars by the Indian government. But this factor cannot be responsible for all the brands. Especially Nissan which sells a lot of mass-market products in the Indian market like Hyundai. Actually, Nissan is not only suffering in India but in the whole world.
By the end of 2019, Nissan decided that it would be cutting its workforce by 12,500 employees. They took this decision because they were suffering from a loss of almost 99% in the operating profits. Nissan, in spite of being a Japanese brand, is infamous for its cars in bad quality around the whole world. Their condition has become so bad that they are forced to close their operations in around 30 European countries. Nissan is doing heavy cost-cutting in their cars.
And if we talk about its sub-brand Datsun then due to heavy cost cutting, it has stopped its operations not only in India but in South Africa, Russia, and Indonesia also. It is quite a matter to think that how Nissan is caught in such a bad condition. Nissan was a brand that was famous for its over-engineered and reliable cars like Silvia, Z- Series, and skyline GTR sports cars during the 1990s in the whole world. The reason behind this is this man who looks like Mr. Bean whose name is Carlos Ghosn.
As I told earlier failure of Nissan is not only limited to India. It is an international issue and we should also know why Nissan was selling its cars without any updates for a decade and why they were taking extreme cost-cutting measures. And how Mr. Carlos Ghosn reached Lebanon in a box from prison in Japan through an airport due to a fraud done by him. During the mid-90s Nissan was famous for its fast and over-engineered cars. Cars like R-34 GTR had such a powerful engine that those can be tuned up to 1000 HP during the 90s
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But Nissan even during this period was suffering in the backstage. Many specialists estimated that Nissan gave away $1000 for every car it sold during that period. And the reason behind this was the expensive parts used by Nissan because they wanted to maintain the quality of the cars and due to this Nissan was caught up in debt of 5.6 Billion Dollars. And due to all this Renault extended a helping hand to Nissan in the year 1999.
Renault captured 36.6% of the equity in Nissan and paid the debt taken by Nissan. French Renault did this because Nissan was doing well in the US and the Japanese market and Renault would be able to enter these markets easily through Nissan. This deal was a win-win situation for both the brands. On one side Renault was involved in making good-looking cars and on the other side, Nissan made well-engineered cars. The CEO of Renault also became the CEO of Nissan whose name was Carlos Ghosn.
He totally turned the work culture followed by Nissan in Japan. First of all Carlos Ghosn found that the average age of the cars made by Nissan is increasing rapidly and due to a shortage of cash, they were not able to update their cars quickly and as per the need. But it was not at all like Nissan had less capital. All their money was stuck in Keiretsu partnerships. Japan follows a culture of sharing equities among the corporates. We can understand this by Nissan bought equity of its vendors and its vendors also had some equity in Nissan. Due to this a lot of capital of Nissan was stuck in these equities. Carlos Ghosn ended these Keiretsu partnerships and due to this Nissan gained a lot of capital.
Carlos Ghosn also finished the seniority-based jobs which were part of Japan since World War 2. In this scheme salaries and pensions were paid according to the age of the people. Due to this 21,000 people lost their jobs at Nissan. Carlos Ghosn faced huge criticism due to these initially and as his company started making profits he was praised a lot in Japan. At one point of time, he also told to resign from his position as CEO if he was not able to turn around the condition of Nissan. These kinds of statements are not common in Japan. With these statements and his work, Carlos Ghosn emerged as a hero in Japan.
In Japan, where an outsider is never praised. Carlos Ghosn was part of their Manga Magazines. He made many decisions that benefitted Nissan in the short term. But due to those decisions, Nissan faced huge losses in the long term and the first decision among them was cost-cutting. Those days were gone when Nissan used to suffer losses in the name of giving quality products. Under Carlos Ghosn, Nissan faced massive cost-cutting. The condition reached a point where they started using plastic parts in their engines.
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Timing belts were also made of plastics. Automatic Transmission of many cars was used to break very early and rusting of Nissan cars became very common. Due to all these cost-cutting, Nissan lost a lot of lawsuits in the US. And they begin to get bottom places in the customer satisfaction reports in the US. Cost-cutting in Nissan cars is also visible in the Indian market. All the cars of Nissan that are launched in India have visible cost-cutting, especially in the interiors.
Now on the one side, automobile companies like Nissan and Datsun were suffering in the markets due to their poor build, Kia became successful as soon as it entered the Indian market. Kia at one point in time was not able to fulfil the demand, such was their success in India. So, how did this happen that Kia became successful in India in spite of many other brands suffering in the Indian market?
To know about this listen to this audiobook ‘Kia Motors (How it entered the Indian Market)’ on KuKu FM. KuKu FM is a leading audio show platform in India with over 4000 hours of non-fiction content and Library. It has a 4.5+ plus rating and you can listen to your favourite audiobook in your regional language including Hindi and English.
On KuKu FM you can listen to audiobooks of various genres like History, Motivation, Finance, etc. You can listen to any audiobook while doing any work like gym, running, etc. and most importantly add some value to ourselves. This platform charges you 399 rupees per year for its subscription. Now let’s come back to the point. The second wrong decision which Carlos Ghosn took was over expansion. Carlos Ghosn thought that the automobiles industry would expand a lot in the future and due to this, they launched a huge number of cars, increasing their car line-up.
But now this sector has not expanded the way Carlos thought and related to this, the present COO Mr. Ashwin Gupta told the car magazine in an interview that the earlier CEO had unnecessarily expanded our global series of cars and our company suffered huge losses and due to the losses the company had no funds to update the current models. By the beginning of 2020 average vehicle age of Nissan cars was almost 6 years
This means they use to sell their cars for around 6 long years without any update. And this is an average age. A lot of models of Nissan are older than 6 years and if I talk about a prime example. Nissan GTR is present in the market for around 15 years without any updating. The same engine is being used in the GTR only with an increased power only some minute changes can be seen. Nissan sold its 370z without any update for around 11 years and eventually closed its manufacturing in the year 2020.
This was all about their sports cars. Take any car from their international market all have the same issue and if I talk about their operations in India. This policy is the biggest reason behind their failure in India. Talking specifically, Nissan attracted the public with its Sunny Model and this car suffered the same way as their other cars use to suffer in the international market. Sunny was launched in India in the year 2001. But they were selling it till 2011 without any updation. On the other side, its direct competitor Honda City launched 3 generations in the years 2008, 2014, and 2021.
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The same is the case with Nissan Micra and even after a huge craze for SUVs in India, their Nissan Terrano was never updated which was based on the Renault Duster. Due to the shortage of funds and no update on the BS6 engine variant its manufacturing was closed in the end. Nissan saw the stars of the thunder when their CEO Carlos Ghosn was arrested in Japan in 2019 due to a fraud. Carlos was arrested because of using the company’s assets personally and giving false information to the Japanese government about his assets.
Carlos was house arrested but he was successful in escaping from the arrest to Beirut by getting into a box on a private jet. Now Japan can do nothing to Carlos as there is no extra addition treaty signed between Japan and Lebanon. Due to this Japan cannot ask for the custody of Carlos from Lebanon. All this shot up the losses suffered by Nissan and after this incident, their stocks price hit many lower circuits.
And now the new executive of Nissan is trying to catch their dropped reputation and from now they would focus more on their major markets of the USA, China, and Japan. And will reduce their presence in the other countries and their first target is to reduce the operations in Europe. Nissan has recently announced that they are going to close their distribution channels in 30 European countries and would also close their major manufacturing plants in Europe.
Nissan is only reducing their operations in Europe but they have already closed the manufacturing of their economy brand in India, Russia, and South Africa after suffering huge losses. There was speculation in the Indian market that Nissan might close its operation very soon in India. But Nissan announced in their official statement that they would work harder on their global products in India. For their global transformation strategy and they won’t be closing their operations in India. Tell me your thoughts in the comment section on this, and tell your thoughts in the comment section and don’t forget to listen to the audiobook Kia Motors (How it entered the Indian Market) on KuKu FM.
