Carlos Ghosn is taking a long view on Russia: "The market will come back."

Carlos Ghosn is taking a long view on Russia: "The market will come back."

Along with Dacia in Romania, Avtovaz in Russia and Samsung in Korea, the Renault-Nissan Alliance is now one of the top four automobile manufacturers with global sales of 8.5m in 2015. Roger Stansfield recently caught up with CEO Carlos Ghosn.

How do you see the global auto market in 2016 and will you be scaling down any investments in those regions which continue to experience difficulties?

Overall it will look much like 2015, with moderate growth of 1% to 2%. China, India and Europe are good – surprisingly good – and the US will remain stable or grow by perhaps 1%. Japan is tough and will be at best stable, and Russia and Brazil will have double-digit contraction.

Crossovers are growing in all markets and profits are better than in the classical sectors. We now have the opportunity for conquest which we didn't have before, but it means we have to be more precise in terms of product planning and marketing.

We are not changing any investment plans and not leaving any markets, but any decisions on Russia and Brazil will be taken very cautiously. We will be more prudent and taking our time on [committing to] new cars, and slowing down some investment.

Last year you lost EUR600m in Russia. How do you see prospects for that market and Alliance operations there?

I can tell you that no car maker is making money in Russia. We are in a defensive mode and struggling to preserve what we have for when the recovery comes, and the market will come back.

Avtovaz faces a tough time because it depends only on the Russian market, so we have to modernise and restructure. Two-thirds of our EUR600m losses last year were down to provisions and only one-third was an operating loss. This is still a significant amount, but a lot of our losses were a one-time depreciation and won't be repeated every year.

We are putting back quality and productivity into Avtovaz; the relationships with the Alliance are much more solid than two or three years ago and at some time growth will resume. We are long-term investors.

And what are the prospects for the Aliance in China?

This year should be a good year. We have expanded from 84 to 112 outlets, we started with two globally produced products which are still gaining momentum and Infiniti has the highest rate of growth in the [Chinese] premium market, although it is smaller than the other premiums.

We are going through a very big push in China and that is one reason why we are in Formula 1. It corresponds to the strategy of the company. We need to boot awareness in emerging markets and one of the best ways is Formula 1. It's about business.

The biggest problem for us in China is going to be holding on to talent, which will be a real challenge for all car-makers.

You are very strong in the diesel market. Has it been damaged by events at the Volkswagen Group?

I won't make any comment on Volkswagen except to say that there is confusion in the public about what is the norm [the NEDC published fuel consumption and emissions figures] and the real driving experience.

The regulators need to tell us what we need to do to establish trust between the car-makers and the public. Please tell us what is acceptable and what is not.

In some countries the percentage of orders on diesel is going down, but it is too early to say by how much. Diesel will continue to be an important technology because it is more efficient on CO2 than gasoline – 15% better. Diesel will decrease in percentage because of cost, but it is not doomed.

And what of the future for electric vehicles (EVs), especially with the climate change agreement reached last year?

Everything tells us that people are going to continue to need cars. Autonomous, connected and zero-emissions cars will become indispensible. Like the telephone, they will go way beyond their original use. Hopefully governments won't try to steer the [auto] industry but make decisions on what's acceptable and what's not.

The energy sector creates 49% of the global CO2 emissions, then it is the auto industry with 17%. Sector by sector we have to ask what the new climate change limits mean. I don't think we can reach it without a substantial number of zero-emissions cars.

We are today selling more than 50% of the electric cars in the world. We have now sold 300,000 and we want to reach the milestone of 100,000 EVs a year. We are not there yet, but we are not very far away. It is feasible with the development of the battery and the charging infrastructure. The problems EVs are facing are squared or cubed for fuel cells. We can't avoid it – everybody is going to have to do electric cars.

At the moment we are being held back by our costs, but the price of batteries is coming down with economies of scale and there are a lot of good examples where governments have taken decisions to support EVs. Norway and France are the two leaders in EV sales and they are a good example. In the next four years we will make a big advancement in terms of range and cost.

Finally, how do you foresee the roll-out of autonomous vehicles?

Autonomous driving is coming, and we have defined three different steps. First it will be on highways in one lane and traffic jams in one lane, and we will be ready in 2017. Then multi-lane, mainly on the highway, in 2018-19, and finally city driving in 2020. How fast the regulators will allow this to come is the big factor.