Nissan Motor Co., Ltd. unveiled today its long-term strategy in Mercosur to sell a minimum of 150,000 vehicles a year by 2010 with Renault support. The impact of the Revival Plan gives Nissan its first significant growth opportunity. Nissan will invest a total of US$300 million by 2005 in this region to manufacture five products locally. Renault and Nissan will cooperate in various operations, including manufacturing, purchasing, sales and administration in the Mercosur market (Argentina, Brazil, Paraguay and Uruguay). With this expansion of Nissan’s operation in the Mercosur, the Renault-Nissan Alliance is targeting 15 per cent of the market by 2010. The first Nissan project to be implemented is the production of the New Frontier pickup model in Renault’s Brazilian manufacturing facilities starting first quarter of 2002.
In order to implement its strategy for lasting profitable growth, Nissan has decided to significantly increase its presence in the promising Mercosur market, which is expected to outrun 3 million units by 2010 compared to current 1.7 million. By leveraging Renault’s strong presence in the Mercosur, Nissan is able to minimize its entry cost to the market while focusing its investments on strengthening its product line-up.
The first step of this strategy is the manufacturing of the new Frontier whose production volume will eventually reach 20,000 units per year. This vehicle will be based on the Frontier 2001 model, which goes on sale in the United States this summer. It is expected to significantly boost Nissan’s sales in the Mercosur market from the current 4,000 vehicles a year. Initially, Nissan is to invest US$90 million for this project. In purchasing, 90 percent of the suppliers will be common with Renault, and the local content level in 2002 is expected to reach 64 percent.
A year after the Frontier production launch at Renault’s facility in Curitiba (Parana), Brazil, Nissan plans to produce its second model in the Mercosur at a Renault plant. It is likely that the Nissan Xterra, an award-winning sport-utility vehicle built in Smyrna, Tennessee, which is a hot-seller in the United States, could be that second product. Furthermore, three other vehicles, either passenger cars or SUVs, are being considered for production in the Mercosur market. An additional investment of US $210 million will be made by 2005 for these new products.
In addition to the industrial cooperation, Nissan and Renault will also cooperate in sales and administration.
With regard to sales, in Brazil, Nissan will develop its distribution network by primarily selecting new dealers from the Renault network. The number of Nissan outlets will increase to 120 in 2003. In Argentina, Nissan will add to its current network selected new dealers from among local Renault dealers. Back-office functions such as services, logistics and administration, based on the Renault infrastructure, will be pooled between Renault and Nissan in order to minimize costs and to make joint operations more productive and efficient.
Nissan will establish a subsidiary in Brazil in 2000 initially to bear the first new Frontier industrial investment. Later on, as from 2002, this subsidiary will import and sell Nissan products in Brazil and export the ones made in Brazil to neighboring countries.
The introduction of the Frontier and other new models to the Mercosur market should allow Nissan sales in the region to reach at least 150,000 vehicles a year, or a minimum of 4 percent of the market by 2010.
For Nissan, this project marks the first significant market expansion after the announcement of the Nissan Revival Plan last October. “The Nissan Revival Plan is on track and now is the time to initiate growth. I am pleased to announce today that the contribution from the Nissan Revival Plan together with the Alliance with Renault enable us to increase our presence in the Mercosur,” said Carlos Ghosn, Chief Operating Officer of Nissan.
Renault implemented from 1995 an ambitious strategy of profitable growth in the Mercosur. Using its long-established presence in Argentina as a springboard, the company launched an offensive into Brazil, the continent’s biggest market. Renault is injecting US$ 1.5 billion (JPY 154.5 billion) from 1996 to 2001 into its strategy and is targeting sales of 320,000 vehicles a year in 2005.
Renault’s expansion in Mercosur is based upon a strong manufacturing base, which will soon comprise four assembly and two powertrain facilities.
In Brazil, the ultra-modern manufacturing base in Sao Jose dos Pinhais, Curitiba (Parana) currently consists of one assembly plant devoted to passenger cars (capacity: 120,000 vehicles a year) and one engine plant (capacity: 280,000 engines a year). Another assembly plant will start its operations in 2001 and will produce light commercial vehicles (capacity: 50,000 units a year). In an initial phase, it will assemble the Renault Master and Nissan Frontier.
In Argentina, the recently modernized Cordoba plant assembles passenger cars and light commercial vehicles (capacity: 130, 000 units a year). Renault also assembles vehicles in Uruguay and has a transmission plant in Chile.
In a declining market, due to the Mercosur economic crisis, Renault’s market share in the Mercosur grew to 6.3 percent in 1999 with sales of almost 110,000 vehicles. It consolidated its lead in Argentina (19.2 percent of the market) and doubled its market share in Brazil in a year, selling 32,500 vehicles and taking 2.7 percent of the market in 1999. Renault is currently the fifth brand in Mercosur. The Renault distribution network numbers 75 branches and dealers in Argentina and over 100 dealers in Brazil.
Nissan’s entry into the Mercosur backed by Renault’s extensive industrial and commercial resources will create 600 new direct jobs and an estimated 3,000 indirect jobs.
Pierre-Alain de Smedt, Executive Vice President of Renault, commented: “The Mercosur is definitely a key market in future competition. Renault will provide Nissan with all the industrial and commercial support it needs to expand its market presence in Mercosur at minimum cost and allow the Renault- Nissan Alliance to gain maximum benefit from expected overall growth in the region.”
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