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May 7, 2008

PORTUGAL: Drastic model line change pays off for Nissan

Nissan Europe’s recent withdrawal from selling conventional segment models in favour of niche products has succeeded but could, with hindsight, have been done a little less rapidly, a senior executive told just-auto.

Nissan Europe ’s recent withdrawal from selling conventional segment models in favour of niche products has succeeded but could, with hindsight, have been done a little less rapidly, a senior executive told just-auto.

“With hindsight, it might have been better to progress slowly,” Nissan Motor ’s senior vice-president of sales and marketing for western Europe, Simon Thomas, said on the sidelines of a media event in Portugal.

“When we made that decision to move away from what some may call traditional segmentation of products, there was a risk that our customers wouldn’t follow what we perceived was this new direction.

“It was quite a robust decision for us.”

He said Nissan, with a 3% share in Europe, didn’t have the scale to compete head to head with the likes of the Ford Mondeo, Renault Megane, Ford Focus, Peugeot 307 and similar models in the C and D segments hard-fought by European manufacturers.

“[They] are very good products so our choice was to try and get better at what they do or try something different.

“Our mantra was to meet unmet needs. Once you make that decision, it’s very hard then to say, well, let’s just do the C-segment, let’s not do C-segment MPV and D segment, so I think we made that shift and I think in the first two years, you look at the dealer network, you look at the volumes in Europe, our volumes have been quite static and you say where’s the benefit in this?

“And it was only in 2007 that we generated the very significant growth from these cars that are not traditional segment cars – the Note, Qashqai, Murano – all these products that don’t fit into a traditional segment.

“That’s when we started to get a return on it. In hindsight, you might look at it and say you could have done things slowly and not worried people so much but I think it was the right decision really.”

Overall volumes were “very stable” – 535,000 in 2006. “It had hovered around that 500,000 for a few years,” noted Thomas.

“But last year we were 636,000.”

He said Nissan stopped selling five models in fiscal year 2007 – the C-segment Almera and the Tino MPV, D-segment Primera, the Terrano SUV and the D22 small pickup truck.

“They amounted to over 60,000 units so at the start of the year I knew we were 60,000 units behind the game and we had to replace that.”

In the end, 160,000 Qashqai crossovers were sold, a gain of over 100,000 units.

“At the end of March (the fiscal year-end), I had 60,000 sold orders for Qashqai I couldn’t supply and in some parts of the year [the wait was] six months,” Thomas said. That 60,000 is about a four-month wait list now, he added. The move to a third shift at the UK’s Sunderland plant, adding 800 workers, will enable him to “sell as many Qashqais as I can”.

He said the final destination – a gain of 101,000 units “was great” but the journey, for the dealers, was hard work.

Four years ago the 2,500 dealers across Europe were told they would need to invest in a new environment to display the new products. Some left, some new “partners” arrived and many of the existing outlets got to work on the changes.

“Our dealers want to see the results, they want to see the growth. Our volumes over the last three years, while they were investing, were pretty static at 500-525k.

“So last year was particularly pleasing for me as it’s enabled me to go back to our network and our national sales companies and say, hey, now we’ve got the growth, now you can see the direction things are going in, it’s going to give you a better return.

“I’ve a simple philosophy. If the dealers get the volume they get aftersales business, the finance business, the used car business, they become more profitable. When they become more profitable they do two very important things: they start looking after our customers… so our brand improves and the quality of our customer service improves.”

Bottom line for Thomas and his head office sales and marketing team: they sell more cars.

That in turn brings a wider choice of models from Japan and that helps further volume increases.

Dealers are now seeing a return on their investment and there has been growth in both eastern and western Europe, though profit margins are slimmer in the west.

Market share has risen from 2.7% in calendar year to 3.3% YTD ’08.

Thomas noted that the average age of Nissan’s model range in Europe had been brought down from five to six years to two to three and it now needed to be kept there.

Model launches this year include a seven-seat Qashqai, a redesigned Murano , the Tiida (aka Versa) in some markets (not the UK) and the start of the European roll-out of the premium Infiniti line.

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