Global Insight Perspective | |
Significance | Nissan and Suzuki have confirmed that they are planning a major extension to their model alliance, which currently sees Suzuki contract manufacturing its MR Wagon minivehicle for Nissan as the Moco. |
Implications | The extended alliance between the two carmakers will give Nissan another Suzuki-built minivehicle model in Japan, as well as a small car designed for the European market. The company will also enter the Indian market through a jointly produced model, as well as supplying Suzuki with a minivan for the Japanese market and a compact pick-up mainly for the U.S. market from 2008. |
Outlook | This major extension to Nissan and Suzuki's existing alliance is evidence of the global automotive industry's move towards strategic tie-ups to increase production and research and development economies of scale. However, both companies are keen to emphasise that there are no plans for a capital tie-up. |
Nissan and Suzuki Have Big Plans to Increase Co-Operation
Nissan and Suzuki have outlined plans to ramp up the level of co-operation between the two companies over the next few years, in a move that will help both manufacturers expand their model line-ups and boost global sales volumes. Nissan's existing agreement with Suzuki sees the company sell a rebadged version of the Suzuki MR Wagon minivehicle as the Nissan Moco. Although the new Moco has been a success in the Japanese market since it was launched earlier in the year, the model is currently Nissan's only offering in the growing domestic minivehicle market. As part of the extended alliance, Nissan will market another contract-built Suzuki minivehicle that will address this weakness. It was also announced that Nissan will offer a Suzuki-derived A-segment small car in Europe from 2008. In a statement, Nissan Chief Operating Officer (COO) Toshiyuki Shiga said, 'This expansion is part of Nissan's continuing drive into new market segments and further global expansion.'
Nissan to Enter Indian Market as Part of Deal
One of the most significant aspects of the deal is that Nissan will form an alliance with Suzuki subsidiary Maruti in order to enter the Indian automotive market. The two companies will utilise enhanced capacity at Maruti's Indian factories to jointly build an as-yet-unspecified Nissan-badged model for sale in the Indian market. Maruti is India 's top carmaker with around a 50% share of the country 's passenger car market, and is 54.2%-owned by Suzuki. At the same time, Nissan will supply Suzuki with a minivan for sale in the Japanese market, as well as a compact truck, mainly for the U.S. market, from 2008. Suzuki is also looking to use Nissan vehicle technology to build a new C-segment car for the United States, which is likely to be based on the Nissan Centra, which is currently on sale in the U.S. market (see United States: 2 June 2006: Suzuki to Develop New Midsize Car for U.S. Market).
Outlook and Implications
It would appear that this alliance makes sense for both Nissan and Suzuki, as there is a natural synergy between the two companies in terms of being represented in segments where the other is not. The strategic use of the other partner's models in carefully chosen markets should lead to increased global sales volumes. Nissan's entry into the Indian market is particularly significant. Although Toyota and Honda have been present in the Indian automotive market for some years now, they have not managed to make an impact on the 'big three' carmakers in the country, Maruti, Hyundai and Tata, as a result of not having a low-cost A-segment vehicle in their model line-ups. Nissan looks to be taking a more aggressive approach to its entry into the Indian market, and in Maruti it has certainly chosen the right partner. However, Maruti will want to protect its own Indian market share and interests and it remains to be seen whether the Indian-built Nissan small car will compete directly with equivalent Maruti models in terms of price. Suzuki will receive a number of new models from Nissan, with an emphasis on building its presence in the U.S. marketplace. The pick-up destined for the U.S. market could be based on the smaller of Nissan's two pick-up models available in that market, the Frontier. Both manufacturers have been keen to emphasise that there are no plans for a capital tie-up despite the extensive nature of this alliance. However, this will not stop the speculation that has been fuelled by General Motors' (GM) decision in March to sell off all but 3% of its 20% holding in Suzuki.