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October 1, 2004

JAPAN: Nissan chief prefers fuel-efficient petrol cars to low-profit hybrids

Nissan Motor head Carlos Ghosn has said he remained unconvinced that hybrid-engine cars were a sound short-term business proposition, adding he believed oil prices would fall from the current historically high levels.

By bcusack

Nissan Motor head Carlos Ghosn has said he remained unconvinced that hybrid-engine cars were a sound short-term business proposition, adding he believed oil prices would fall from the current historically high levels.

“There is some market demand (for petrol-electric hybrids),” CEO Ghosn told Reuters at the unveiling of the new Tiida compact car in Tokyo on Thursday.

“We will come out with a hybrid car in 2006 in the United States as planned, but only because stricter regulations in California will make it a necessity,” he said.

Nissan, owned 44.4% by Renault, has an agreement with Toyota to buy its rival’s hybrid technology, having opted to forego development on its own to save money, the news agency noted.

Ghosn has repeatedly said that while car makers may claim they are now making money on hybrids, margins on the fuel-sipping vehicles were still much lower than for conventional internal combustion engine cars, equating to a loss of potential profits.

Ghosn, famous for his profit-centered strategy, reportedly added that while Toyota’s new Prius hybrid car was flying out of US showrooms, its sales were still a drop in the bucket for a 16.9 million-unit-a-year market.

With supply falling chronically short of demand, Toyota now sells less than 5,000 Priuses a month in the United States. But it plans to raise output capacity by half to 180,000 units a year in 2005 – much of that bound for the United States, Reuters said.

While record-high oil quotes are making hybrid vehicles a more attractive proposition for customers, Ghosn reportedly said he expected the US benchmark crude price to fall from the current $50 a barrel level.

“I personally don’t think it’s going to stay there. I’ve spoken to many people in the industry … and there is no physical reason for prices to stay there,” he told Reuters.

For now, Nissan is aiming to lure environmentally conscious drivers in Japan with fuel-efficient, pure petrol compact cars such as the Tiida model which goes on sale in Japan on Thursday.

Ghosn said compact cars will continue to be one of the most important segments in Japan, noting that it accounted for five of the 10 best-selling models last month. He told Reuters, however, that the model had “global potential”, indicating it would also likely be sold overseas.

Nissan now has about 15% of Japan’s compact car market thanks to hit products such as the March and Cube.

With the addition of the Tiida, which combines a compact’s small frame with a roomy interior that Nissan said rivals its luxury Cima model, and the Note model to hit showrooms in mid-January, Ghosn reportedly said he expected Nissan’s share of the compact segment to roughly double to over 25%.

Nissan is counting on the Tiida and five other new models to help deliver its commitment of selling one million more vehicles during the 12 months starting on Friday compared with fiscal 2001 levels, for a total 3.6 million units, Reuters noted.

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