November 30, 2011
Q&A with CEO Carlos Ghosn at the Tokyo International Automotive Conference
On the eve of Tokyo Motor Show 2011, Carlos Ghosn spoke with Tatsuo Yamakawa, editor-in-chief of Nikkei Business Publications. The interview covered topics including Nissan’s international expansion, Japan’s spectacular recovery from the March disasters, the bright future for EV vehicles and the pernicious effects of the uncompetitive yen.
Q: Ten years ago Japan’s global car companies were mainly Toyota and Honda. But recently, Nissan has been doing well, especially in developing countries. Why is that the case?
CEO: Obviously I’m not going to tell you about the competition, but I am going to tell you about why I think Nissan is doing very well today. It is because we have a very clear strategy, very clear, market by market. We have very clear priorities, and we have been preparing systematically for the last ten years. This is not an all of a sudden occurrence. This is the result of systematic planning and systematic priorities.
We started with China in 2003 when we made an alliance with Dongfeng. In 2003 we sold 60,000 or 70,000 cars in China. This year we sold 1.2 million cars and we think that by the end of the mid-term plan we are going to be crossing 2 million cars in China. So this has been systematic planning and preparation, and again, a very good spirit, very good work with the Chinese. This is a Japanese-Chinese company. It is not Japanese. It is not Chinese. It is both. So good work between the Japanese and the Chinese delivered a very strong performance.
After China, we went to Russia. We built a plant in St. Petersburg. After this, thanks to the alliance with Renault, we are now working with AvtoVAZ. The three of us have 36% of the market in Russia, and the Russian market is growing. This is the second step of the strategy.
Then, we went to India where we built a plant with Renault in Chennai, and we are developing a strategy. For the first time, we are going to be selling 40,000 cars in India. We used to sell 100 cars three years ago. And there has been the introduction of a lot of products. And finally, three weeks or one month ago I announced a new plant in Brazil in the state of Rio de Janeiro, again using the presence of Renault in Brazil in Curitiba.
So what I would like to say is that it is systematic planning and very clear strategy, one after the other, not everything at the same time. And particularly the spirit – that if you want to be successful in emerging markets that you have to accept diversity, manage cross-culturalism and make sure that not only do you bring the strengths of your own company to the market, but that you learn from the market and that you grow people who are going to sustain your business in that market. And so far we have done very well. I was very proud that in the first since months of this year, Nissan was the only Japanese company with sales up. We had 11% better sales, even though we had to face the earthquake, the tsunami, the stoppage of the plants. So far we have had a year with very strong growth, even with all the headwinds we had to face.
Q: We know that Brazil is very close to your heart. Please could you tell us a little about Nissan’s plans there.
CEO: If the decisions of the CEO of a company were based on emotion, I would have put Brazil first. But frankly, I didn’t. We started with China. In fact, Brazil came last because logically for Nissan we had to start with China, then Russia, then India, and finally to Brazil. Obviously, it was a great moment for me because you know that my ties to Brazil are very strong and I was received by the president of Brazil as a Brazilian. So they were very happy and we had a lot of support. And I think Nissan is going to do extremely well in Brazil, because we are very familiar, and somehow the fact that the CEO of Nissan is Brazilian creates a lot of ties. And for the brand, this is very important. So I am very optimistic about the development of Nissan in Brazil.
But, coming back to your point, I don’t think we can put our emotions in our decisions. We have to take care of our emotions, but at the same time they should always take a back seat to rationality and the logic of our business. But I think now Nissan can be successful in Brazil. But if we were taking the decision ten years before, or five years before, we would not have been because we would not have had products, and we would not have had the capacity to really give the Brazilian consumers the products and the kind of performance that they want.
Q: Nissan was last of the Japanese automakers to enter the Chinese market. But now it has the largest share. Why is the secret of that?
CEO: In business there is a lot of common sense that is wrong. Coming late doesn’t make sense. There is no coming late. You never come late. You come when you come to a market. The market belongs to no one. Volkswagen used to have 70% of China. You say that because you came late you should leave China to Volkswagen just because you arrived after? It doesn’t make sense. You arrive when you are ready. We arrived in China in 2003 and I remember very well a lot of people said, “You are coming late. Toyota and Honda are already there. Volkswagen, General Motors have been there. Why do you think Nissan is going to be successful?” There was a lot of skepticism about it.
We arrived in 2003 because we could not arrive before. In 1999 we had the Nissan revival plan, we had the big debt, we were making losses, we didn’t have the products, we didn’t have the management structure, we had no strategy. So you want to go to China? To do what? We revived the company, we put it back on a growth track, we prepared the products, we had an alliance and a vision. So 2003 was the fastest we could come to China. And as you know, because we have done the right things, not only in terms of products, but also in terms of the right partners, the right approach, the right management tools, today China is our No. 1 market, and we are the leading Japanese brand in China – even though we arrived after everyone else. So, this preconceived idea that you come early or later into the market doesn’t make sense. When you come, you need to make sure that you are ready. And second, you need to make sure that you can focus all your energy to this particular market in order to be successful. Because we have done this, today we are being rewarded with a great operation.
Q: The alliance is an important part of Nissan’s global strategy. What is most important for ensuring the success of the alliance?
CEO: The main reason why our alliance between Nissan and Renault, and now strategic cooperation with Daimler, plus the fact that Nissan is cooperating with Mitsubishi, and that Nissan is cooperating with Ashok Leyland — these networks of cooperation are working very well. At the end of the day, it’s a mindset. I don’t think there are tricks or processes. It is a mindset. If you get into a mindset where it is a one-way street — I am going to take whatever I want, or I am going to acquire the other party — it’s not going to work.
So you need to start with the mindset of cooperation. It is a two-way street. And second, you need to have respect for the other party, no matter if the other party is smaller than you, bigger than you, different to you. If you can keep this mindset, you are always going to be successful. It is amazing that Nissan, since 1999, has been successful in every single cooperation. There is not one failure, not one. Why? Because Nissan has the mindset of good cooperation.
And I can tell you that in 12 years I have seen tens of cooperations in the car industry which all went down. Why? Because it is always the same mistake: No respect, or there is a power struggle between the two parties. Recently we have seen an interesting story unfolding in front of us where you have two major companies, maybe even an exchange of shareholding, and then after three years not even one project realized.
We started with Daimler, which is the latest one, not even two years ago. And already there are six contracts signed – in one year and a half. So, this is not a question of being German versus being Japanese or being French. This is a question of mindset. Do you have the mindset and can you have the discipline in your organization to ask your people to go into a corporation, into a win-win, respecting the other party, making sure they are going to get what they want, but at the same time giving the other party what they want, and being only project driven, going for the synergies, not for anything else and avoiding all the battles that can exist between different corporations. This is the reason why we don’t have one failure in terms of alliances, just because all the Nissan people working in this alliance have the right mindset. It is never a power struggle. Never, and we know exactly what we want, and we multiply the synergies, and when there is anything else, we just stop.
Q: Do you think that companies sometimes see an alliance as an end in itself, rather than as a route to some goal?
CEO: I’m not going to talk about the competition, but I can quote someone. Dieter Zetsche, who is the CEO of Daimler. When we were at the press conference where we announced the strategic cooperation between Renault and Daimler, and a journalist asked him: “Why do you think you are going to be successful cooperating with Renault and Nissan when you have been so unsuccessful working with Mitsubishi?” They asked him the question, so I am not giving you my opinion. I am telling you what he said to the journalist.
He said that with Renault-Nissan we already have the projects, we already know what we are going to be working on, and in consequence of this, we are doing the cross-shareholding. While with Daimler and Mitsubishi, and with Chrysler and Mitsubishi, we first signed the financial agreement, and then we were looking for projects to do together.
It is completely different. Because when you make an exchange of shareholding, or you acquire, and you say, “OK. Now that we have done this, how can we cooperate?” It’s not going to work, because people don’t understand why you are doing this. But if you start by lining up the project and say, “I can exchange engines, we are going to work together in certain markets, we have certain platforms, we are going to have economies of scale,” automatically people understand why you are cooperating, because they have all these projects lined up. So it changes completely the mindset of the organization.
Q: There is talk about a sharing of luxury car platforms with Daimler. Are there really merits for Nissan in such an arrangement? Could you tell us about a win-win situation?
CEO: One of the reasons why there is a good cooperation between Daimler and Renault and Nissan is because, frankly, we don’t compete, even when you take Infiniti and Mercedes, which are two luxury brands. And if you take the two brands, region-by-region, there is practically no cross-shopping. Cross-shopping means that a person who is looking for an Infiniti is also usually looking for a Lexus or for an Acura or a BMW, but very rarely looking for a Mercedes. And the other way round — somebody who is looking for a Mercedes is going to be looking for another brand than an Infiniti. So when you don’t have cross-shopping – and this is valid in the U.S., in Europe and in China – there is less risk that you are going to be very reluctant to cooperate.
I don’t think that we are going to share all the platforms because the Infiniti platform is going to remain the Infiniti platform, and the Mercedes platform is going to remain the Mercedes platform. But if, for example, it is in the interest of Infiniti to say, I need to add a car to my line-up, instead of going and developing a platform by myself for a relatively limited number of cars, which is going to cost a lot of investment and be not very cost-competitive, if I can use an existing Daimler platform, and Daimler agrees, and I can build the car on their platform, it is a win-win. Because I save all the investment that is necessary to develop the platform, and Daimler wins because I am going to ask Daimler to build the car for me. And I am going to ask Daimler to marginally invest to make a new car that I am ready to pay for.
So I don’t think that it is going to be systematically and massively common, no. But it is going to be more tactical, opportunistic on the margins – one engine, one platform, one plant, mainly marginally. But when you take a look at the margin, it ends up making a lot of money. When you add up the power of the investments in R&D of Daimler cars, Mercedes cars, plus Renault and Nissan, I think we are the No.1 investor today in the currency, when you put the three powers together. There is a lot of firepower in R&D. Now, this firepower is even more important if we can share. And sharing is extremely important.
I can tell you that one of the reasons that Nissan is doing so well in Europe, and about to become the No.1 Japanese brand in Europe – which means that our progress is not only in emerging markets, we also have very strong progress in developed markets, and in Europe we are progressing a lot – one of the reasons we are progressing a lot in Europe is that we are taking all the diesel engines of Renault and putting them in our cars. So we don’t have to develop the diesel technology and we don’t have to develop the engines – and it is a huge investment. We just take it from our partner and we put it in our car. We don’t even have to develop the finance operation. We are using the finance operation of Renault, which is extremely well developed in European countries.
This is where the synergies of the alliance work. They give me the best they do. I give them the best I can. And at the same time, you are going to develop a kind of win-win operation.
Q: Looking at your new mid-term plan, together with Renault you aim to build more than 10 million cars. Are you looking to be the largest carmaker in the world?
CEO: No, I don’t think we have any particular ambition to be No.1, No.2, No.3, or No.4. We want to grow, and we want to grow in a competitive way. Obviously, if you end up as No.1 because you have great products, good technology, good strategy, that is OK. But the objective is not to be number one. Being No.1 cannot be an objective. It has to be the consequence of a job well done. If you do your job well, you become No.1. If you don’t do your job well, you don’t. But if you want to be No.1, but you are not doing your job well, you are going to have a lot of bad surprises. We have a lot of companies trying to grow more than they deserve and end up hitting a wall. I don’t want the alliance to go this way.
In 2011 the alliance will cross 8 million cars. This year. The calendar year, and certainly also the fiscal year, will be above 8 million – between Renault, Nissan and AvtoVAZ. So we have already a very big scale. We are going to be among the three largest carmakers.
Frankly, being No.1, No.2, or No.3 doesn’t make any sense, because what is important is the scale. Whenever you have scale and you are using scale, then you are going to be very effective in terms of investment and in terms of cost. That is what is important. So I know that I have no problems of scale. The only problem is how to use the scale in a smart way. That is the only problem we have. We don’t have the problem that car manufacturers who are building 2 million cars or 3 million cars, or even 4 million cars have. We are already at more than 8 million. So, by using the same platforms and the same engines etcetera, we can really offer something for our suppliers and for our dealers that other car manufacturers cannot offer.
Q: To return to the domestic market. You referred to rationality, but is it a rational proposition to continue building 1 million cars in Japan at present?
CEO: The rationale of maintaining a very strong base in Japan is very easy to understand. It is very simple. Nissan is a Japanese company. It has Japanese DNA. Nissan has the established strengths of Japanese industry — for example, the strength of the genba, monozukuri, R&D, and engineering. These are very clear strengths of Japan. So every company wants to benefit as much as possible from the strengths of its home country as much as possible. We are not an exception, and we want to continue to benefit from it.
And when I said that we want to maintain 1 million cars assembled in Japan, it gave a clear signal that, no matter how strong our expansion is in emerging markets, and how strong it will be, we will continue to have a very strong base in Japan. Because we think that the monozukuri in Japan is second to none. We will continue to have mother plants in Japan and we will continue to have strong R&D in Japan.
Here comes the surprise, and the surprise is the unbelievably uncompetitive yen, which has been kept like this for a while. The historical average has been 110 yen to the dollar. I am talking about yen-dollar because that is what matters. Then the yen went to 105, 100, and we started to have statements saying that “we are going to watch, we are not going to allow the yen to strengthen”.
100, 95, 90, 85. So obviously, we start to voice our concern. This is very important for Japan because we are responsible for 4 or 5 million’s [worth of cars] employment in Japan, as an industry, and we are largely exporting our products. We cannot, in a situation where the global economy is in turmoil, allow the Japanese yen to strengthen against every other currency in the world – there is no exception. Particularly when you take a look at the yen versus the won, compared to the dollar. For the last few years the difference is 50%. We are competing against other Japanese and Korea in Asia. That’s it. I don’t think the Chinese are at that level. They will be, but not yet. So we are competing against the Koreans. All of a sudden, in the Middle East, in South America, in Eastern Europe you are competing against somebody who is a very good company, but whose currency is going down against the dollar while your currency is appreciating against the dollar.
We have never lost market share in the Middle East as Japanese, never. I am talking about us, about Toyota, about Honda, everybody. The first time we lost market share was the last two years. Why? We could not compete any more. So we have been voicing this. We said this. Unfortunately, as you know, the situation doesn’t change. The yen is still at 77, 78. People say that there is no solution.
Yes, there is a solution. How did the Swiss do it? Why were the Swiss capable of saying, “We are going to draw a line on the sand and we are not going to let the Swiss Franc appreciate against the euro.” They said this. And Switzerland is a very small country compared to the power of Japan. Japan is the third largest economy in the world – a huge financial power. Then the small Swiss, all of sudden, stood up, aligned everyone and said, “We are not going to let the currency appreciate.” And they haven’t.
Today, if you compare the Swiss Franc to the euro, they had their position and it didn’t cost them a lot of money. Why? Because the market respected it. They said, “OK, these guys are serious, we are not going to play against them.” So there are solutions and we are, as good citizens, asking for the same thing in Japan.
You have to defend the competitiveness of Japanese industry. I am not saying giving advantages, but eliminating the huge handicap that we are facing today with the strong currency. We need cooperation about the environment, not to create an advantage, but just to eliminate the handicaps.
But people say, “Yes, you are making money, why do you complain?” We are making money in every single operation except in Japan. Today, every single project that is coming to me for a decision – when I have the choice about sourcing the project in China, in Thailand, in Mexico, in Europe or in Japan, Japan is completely uncompetitive.
So, it is not a company problem, because companies can always go and source somewhere else. It becomes a country problem, because then if you allow the jobs and the activities to continue to go, in a few years we are going to have a serious problem. That’s why I am passionate about it, because I think that really it is a serious situation and it’s a situation where companies want to stay and develop in their home countries but they need some kind of relief from the major handicap, which is the uncompetitive level of the currency.
Q: Do Japanese people put up with this too easily, with too little argument?
CEO: No, I don’t think it is a question of voice. I think it is a question of action. When you face a situation, there are solutions. You put them in place or you don’t put them in place. And frankly, again it is very impressive to see what the Swiss have done. You watch what the Swiss have done and it is very impressive that they held their line and they defended their industry. And it is a small country. Switzerland is such a small economy. And even though they had the huge euro in front of them and everyone afraid of the euro was buying Swiss Francs and the country’s currency was going up and it was a threat to their industry, they held a very strong line.
Q: With the March disasters and the Thai flooding there have been many reasons to rethink supply chain management. Has your thinking changing following these two disasters?
CEO: No, the supply chain was affected by the disasters, but we did not change our supply chain. We made some small modifications. For example, as you know, one of the major issues we faced after the earthquake was that we discovered that tier-two or tier-three suppliers were one plant common to the whole industry. So when the plant stopped we discovered that we could not make cars – and that our competitors also were not able to make cars.
The result of this is that whenever we have only one supplier for a part, we want to make sure that the supplier has at least two places in the world where it is supplying the parts from, because if you accept one supplier and one place you are in danger because you never know what is going to happen.
And we have this with the chips, and some electronic devices, which, by the way paralyzed the car industry but not only the car industry. This is a lesson for the future. Never depend on one location to supply important parts like these, no matter what. But for the rest, I don’t think it will change our supply chain too much. I don’t think the earthquake had a significant impact on the way we are organized. It had a significant impact on the speed of reaction, and the way we work inside the company, but not on the way we are organized.
I think the biggest threat to the supply chain in Japan is not so much coming from natural disasters, or the risk from earthquake and tsunami, but mainly from the fact that a lot of – in our case – carmakers just want to get out of the yen. Because of the strength of the yen, they are trying to source more from China, more from Thailand to reduce the impact of the strength of the yen on their product. This is a much more serious threat for the supply chain, particularly in Japan.
Q: A lot of people here will be interested to hear about environmentally friendly cars. The Nissan LEAF is now selling as many as you can produce. Would you like to say something about that?
CEO: I think we have already sold 19,000 Nissan LEAF, mainly between the United States and Japan. As you probably know, all the LEAFs are connected with a data center in Japan, so we have systematically all the information about how people are driving the LEAF, how many miles they are doing a day, how much they are charging, how many hours. It is very useful to help us monitor the performance.
What’s very interesting is that, since the launch of the car, we haven’t had one serious quality problem, which means this was a great surprise for us. When you launch a new technology there are always some surprises, some risks. But we didn’t see any of those.
People are using the LEAF in an extremely moderate way. They are doing an average of 20 to 25 miles a day in the United States, probably 25 km in Japan. They are recharging the battery two hours or two hours and a half. People talk about the range, but the range for the people buying the LEAF is not an issue, because not a lot of people are driving 100km a day or 80km a day. Most of the people are very happy with the LEAF. They are very attached to the product. There is some kind of engagement. The driving performance is also a big surprise because this is a car that drives with no vibration, no smell, no noise, nothing. So you get used to it, and then it is very difficult to change.
So, so far, so good. I think that next year we are going to continue to ramp up production. For the moment, the bottleneck is the battery, so we can only produce as many LEAFs as we can produce batteries. Today, practically all the cars that we can produce are being sold. In the United States we are selling the LEAF only in five states. So, little by little, we are going to increase the number of states where we can sell the LEAF. Today it is limited by supply, it is not limited because this is the demand.
In the US, we are selling around 1000 LEAF a month. We have 350,000 people, hand-raisers, for the LEAF. There is a lot of interest. I think it is a great story, a great technology. I think electric cars are starting to make inroads in the industry. And I can bet you that over the next years that it is going to be a very important segment of the car industry.
Q: What sort of electric vehicle lineup do you imagine Nissan will have in 2020? What share of Nissan’s sales will they make up?
CEO: We said that from the beginning, we think that the proportion of the sales is 10%. Obviously in the market where you are introducing electric cars, if you are not introducing the electric cars it cannot be 10%. But all the markets where you are introducing, the potential in the first step is 10%.
And if you say why it is 10%, it is very simple that when we make surveys in Japan, in Europe, or in the United States, or in China, and we ask people “What are you ready to buy for your next car?” And you have the choices between electric cars, hybrid, normal combustion engine, diesel, or whatever technology, already 10% of the people say electric cars, even though they have never driven an electric car. So you will have an immediate and spontaneous amount for the electric car, which is about 10%.
We think this number will be going up when an offer will be here. For the moment, Nissan LEAF has sold 19,000 cars. It is already the most sold electric car in the history of the car industry. There is no other electric car in the history of all the industry that has sold 19,000. So it is something completely new. People are going to have to get familiar with it.
I have been told that a lot of people go to the show room, and they take Nissan LEAF, they drive it and get familiar with it. They want to know how to charge it. So people are getting familiar with the electric technology. We are going to be bringing out 4 cars. Nissan LEAF is the first of them. There are 3 more cars coming, addressing different needs. Renault is also introducing 4 cars. Renault has already launched 2 cars in the last 2 months and there are 2 other cars coming next year.
So the Alliance is going to have eight different products in electric cars. And in 2016, you will have eight cars mass-marketed by the Alliance. And the cumulative sales, we have already said that 1.5million electric cars will be sold, which would probably position us as by far the largest maker and mass-marketer of zero-emission electric cars. Then, obviously, you are going to have more cars coming later. Technology is moving very fast. Now the technology is concentrated on making the car cheaper, more affordable, and solving some of the concerns of consumers.
And I think it going to go very fast. I don’t think there is parallel for this. Probably the only go parallel I can draw to the evolution of the electric car is the evolution of the cellular phone. The first cellular phones had a weight of 2kg. They cost ten thousand dollars, they took eight hours to charge, and you could speak for 20 minutes. That was the first generation of cellular phones.
People looked at them and said, “It will never work.” Well, there is hardly a person on earth today who does not have a cellular phone. And the cellular phones are not 2kg. They are very small. They are extremely cheap. They became an instrument not only for telecommunication, but also for every kind of application. So I think you have here a product, transportation, which is going to innovate a lot. It is going to be much more than transportation. But we are at the beginning of it.
Tomorrow you have the Tokyo Motor Show. And at the Tokyo Motor Show, Nissan is going to exhibit a house that is charged by a car battery. So far people think that a battery is a device that is linked to the car. Wrong. The battery of the car is for storage of energy that is available for anything. So, it happens that it is in the car, so you can use it for the car, but we are going to show a system in which you can use the battery of the car to give energy to your house. And when you charge a battery for the Nissan LEAF, you can use this electricity in the battery for 2 days of energy in the average Japanese house.
Now you can imagine a kind of system where the batteries become a kind of energy box that can be used either in your car, in your house, or even in your office. So now you have a completely perspective on what the electric car is, and what the battery is. I think that we are at the beginning of something that is going to change a lot the way we even think about transportation and about energy.
Q: Do you think the technology to provide electric vehicles with enough range on a single charge is sufficient?
CEO: If may be, but frankly I am not so preoccupied by the mileage. Even though the engineers here can do miracles, the number one priority is not to increase the mileage. Why? Because, as we said, the target is 10% of the market. And for 10% of the market you don’t need much more than 100 miles or 160km. Obviously, there are a lot of people who would like more, but they are in the 90% that you are not targeting for the moment. So, the first priority is to reduce the cost.
Let’s not forget that electric cars are viable today because governments everywhere are ready to put an incentive for the consumer. So we should, as fast as possible, cut the cost of the battery and the car to be independent of public incentive. That is the priority No. 1. It is not the range. It is to cut the cost, work on the affordability of the car to ensure that when governments stop the incentives that you can be profitable on your own and that you do not depend on this.
And you know what? The technology allows you that, because an electric car is, by definition, simpler to make than a combustion engine car. But we just need the scale. So I am asking my engineers – No. 1 priority – to cut the cost. No. 2 is to increase the functionality. But first we want to make sure that we make a great product for this 10% of people for whom the existing performance is OK. Then after this, yes, range, weight, size will become an additional benefit for the consumer.
But 10% of the global market – this year the industry will be selling between 74 and 75 million cars. So 10% is 7 million cars. There is no capacity. Today, nobody can produce 7 million cars. So before targeting 15 million or 20 million by increasing the range, let’s make sure that already for these 7 million potential customers we are going to make a great product for them independent of governments that are ready to provide incentives or not.
Q: What place do hybrid cars have in that strategy, especially next to electric vehicles?
CEO: We are here to serve a market and in some cases we are leaders, and in some cases we are just competitors. In the hybrids, we are not leaders. In general, in one technology you have one leader. You don’t have five. In the hybrids, Toyota took the leadership and everyone else followed. We are one of those. On electric, we are the leader and everyone will follow.
So does it mean that we are going to ignore hybrid? Not at all. Because, if the market wants hybrid, we are going to deliver hybrid. Are we going to overemphasize hybrid? No. We are just going to deliver the hybrid that the market wants, and every time that we can develop electric cars for the consumer, we are going to do it. So, it’s not either/or. It’s everything that the consumer wants, but at the same time we have our own strategy that consists of prioritizing some technology, or being a leader in some technology, because that’s what makes your brand name, that’s what makes your corporate image, that’s what makes you different from the others.
I think that speaks a lot about the technology in Japan. The car industry in Japan is still an extremely creative and innovative industry. Because Toyota has taken the leadership on hybrids, we are taking the leadership on electric cars, probably the leadership on fuel cells will go to one of the three Japanese makers – we are all competing on fuel cells. So this means that Japan has an extremely creative and innovative industry, ready to take a lot of challenges for the future – which is a very good sign for the health of Japanese industry in the future.
Q: It’s sometimes said that when cars go electric they will be easier to make and that some companies that haven’t, to date, made cars will be able to enter the market easily and compete. As a car manufacturer, what does Nissan think about that?
CEO: No, frankly I don’t believe it. I can tell you that there is a lot of technology in EV. There is a lot of investment and I don’t think that small companies can do it. I also think that when consumers buy a car they want to buy a car from a big name. Why? Because they want to be reassured that if the car has a problem they are going to be reimbursed, or the car will be changed or repaired. You are not going to go to a small mom-and-pop company that may make a surprise for you. You are going to have some niche products as usual, but the bulk of electric cars will come from the large car makers.
What is interesting is that when we launched our electric car offensive in 2006, nobody had electric cars, everybody said this is too early, it’s not going to work, we are not ready, etc. At the Frankfurt Motor Show in September there was not one single car maker who did not have an electric car. Everybody had an electric car. I am sure that tomorrow at the Tokyo Motor Show we are going to see a flurry of electric cars. So the technology is coming and everybody is going to be engaged and again, some people are going to come as competitors because the leadership has already been taken – the electric car is already associated with us and with Renault.
Q: We had a session dealing with South Korea earlier today. Korean makers, in particular Hyundai, are expanding their world share. You mentioned the exchange rate earlier. Is it that, or is there something else at play?
CEO: No, I don’t think you can be successful because you have a competitive exchange rate. I am not saying that. But, when you are a good company and you are competing against another good company… I can tell you that if the yen was 50% more competitive against the won, you would have seen a completely different picture in all the emerging markets. Because we are gaining market share, even with the yen at 77. We are gaining market share everywhere. So you can imagine that if the yen was neutral or, if by some miracle the yen was competitive, we would have taken huge market share everywhere.
So I am not saying that the Koreans are gaining market share because of the won. They are doing a great job. They have great strategy. They deserve all our respect and we are watching carefully what they are doing. But, you know, if your main currency goes down compared to your currency 50% – this is the last three years – it is a big advantage. It is not the only one, but it is a big advantage.
Q: What are Japanese car makers lacking that they need to compete and win in today’s world car market, especially in developing countries?
CEO: Well, I think that Japan has done very well already. I don’t think that we can say that Japan has not done a good job in the car industry. When you take the global position of the Japanese car makers, it is still extremely significant. We are at 6.2% global market share today. If you add Toyota global market share, Honda, Mazda, Mitsubishi etc, Japan is huge in the car industry and is doing very well.
And particularly so knowing all the problems that we have faced. We have been extremely challenged because we had to face yen appreciation, the tsunami and earthquake in Japan, the flood in Thailand, which is not finished. And they hit particularly Japanese industry, because the yen appreciation only affects the Japanese car industry, the tsunami and earthquake were only Japanese industry, and Thailand is mainly [affecting] Japanese industry. Even with all of this, we are still a significant part of this industry.
So I think Japan has a lot of assets and will continue to play a very important role in the development of the car industry. I don’t want to give you the impression that we are on the decline. We are not on the decline and we have a lot of technology, a lot of products, a lot of knowledge to continue each in its own way – Nissan its own way, Toyota its own way, Honda its own way – to develop in the global market.
Q: I remember you saying several months ago in an interview that Japanese people can make miracles happen, that it happened at Nissan. Would you like to say something about how Japan can rebuild after the March disasters?
CEO: If I take the example of what happened after the earthquake on March 11, we looked at the level of damage that was done, the way that our plans were, the disorganization that it had created. But when one could objectively see the dignity, the discretion, the resilience, the engagement, of every single Japanese worker, and every single Japanese contributor, you don’t have to ask yourself why Japan is an industrial powerhouse. Because, with these kinds of qualities and this kind of engagement at all the levels of society, Japan was able to completely erase the consequences of such a kind of disaster in five months.
It hit on March 11 and all our plans fell, and all the plans of our competitors. We did not produce cars for many weeks. But by the end of September we were all in full production. Well, I think that this is something that speaks a ton about the capacity of the Japanese people, and about the capacity of Japanese industry. If anyone has a doubt about the resilience of Japan, just looking at what happened between March 11 of this year and September of this year means no further explanation will be needed.
As Japanese industry, we are here to stay. We have a very strong base. We have a genba that is second to none in the world. We have a monozukuri that is one of the most sophisticated and efficient in existence. We just need to continue to build strategy, to believe in our capacity to transform this industry, to continue to go global in all the markets – and just compete. Frankly, I am extremely confident that companies will do very well.
Now, when we are talking about the strength of the yen, I am not worried about companies, because companies will always adapt. I am worried about the country, because what is happening is that companies are shifting employment outside of Japan. And these jobs should stay in Japan because, first, Japan needs them, and second, because companies will be much stronger, in my opinion, if they continue to have a very strong base in their home market.