The Way Ahead; Trends Reshaping the Auto Industry
Carlos Ghosn, Chairman and CEO of Renault, Nissan and the Renault-Nissan Alliance
The Renault-Nissan Alliance was started on March 27, 1999 with Renault acquiring 36.8% of outstanding Nissan shares, and with Nissan acquiring 15% of Renault later in 2001. Chronological details can be found in the EU-Japan Direct Investment Register.
Carlos Ghosn speaks at the Foreign Correspondents Club of Japan (FCCJ) as President and CEO of Nissan Motor Company Limited
On July 17, 2014, Carlos Ghosn spoke as President and CEO of Nissan Motor Company at the Foreign Correspondents Club of Japan (FCCJ) in Tokyo, we summarize his talk here in this article.
Nissan leads innovation and brings new technologies to market:
Nissan has made great progress to make driving easier, safer and more environmentally friendly.
Nissan to bring autonomous drive vehicles to market before 2020.
Nissan Leaf has become the leading zero emission vehicle by a large margin.
Four major socio-economic megatrends reshape the automotive industry
Innovation and new technologies allow Nissan to address the four global socio-economic megatrends:
- Rise of global megacities: increases the need to ease congestion, reduce emissions, improve traffic management
- Need for in-car communications: must satisfy the needs of the connected, digital generation. Our vehicles must be as connected as smart phones and tablets
- Aging society: need to bridge the generation gap. Seniors need technologies to drive safely until later age.
- Must embrace gender diversity: must respect the role women play as consumer purchasers, as decision makers, managers and leaders throughout the car industry
Nissan is determined to innovate in each of these areas and by developing new technologies, Nissan aims to address the opportunities created by these four major megatrends.
1. Rise of global megacities
Today 30 cities of more than 10 million people, including Tokyo, Osaka, Beijing, Shanghai, Sao Paolo, Mexico, Mumbai. Number of megacities will reach more than 50 by 2030, with 1/3 being in China. With the rise of mega-cities in China, it is not surprising that China increases support for electrical vehicles to reduce pollution. China aims that 30% of Government vehicles are electric, and to eliminate sales tax on all electric vehicles.
20% of CO2 emissions come from transport, therefore automotive industry must be part of the solution.
Nissan introduces ENV200 electric vans in Europe and later this autumn here in Japan. Electric vans have the potential to change the cost economics of fleet management.
Autonomous driving can help to reduce pollution and congestion
Nissan is seeking regulatory changes and consumer adoption to make autonomous driving a reality. Nissan seeks workable regulatory standards.
Automatic lane changing and automated parking can increase convenience and safety.
Difference between autonomous driving and self driving cars
Autonomous drive is about relieving drivers of repetitive tasks, particularly in congested or long-distance situations, while the driver remains in the drivers seat and control.
Self driving cars don’t require human intervention, and remain a long way from commercial reality. Only suitable for tightly controlled environments at slow speeds, and face a regulatory minefield.
Nissan focuses on autonomous drive systems that can be introduced over 4-5 years.
Nissan’s timeline until 2020 for the introduction of autonomous drive systems:
- end of 2016:
- traffic jam pilot for congested highways,
- fully automated parking systems
- by 2017 expect parking to be fully automated
- 2018: multiple lane controls, allow cars to circumvent obstacles and change lanes
- before 2020: intersection autonomy, navigate city cross roads without driver intervention
2. Connected car
Deploying “Nissan Connect” system with bluetooth, apps, cloud base systems.
Nissan expects more than 1.5 Million Nissan cars to be connection to enhanced communications by 2015, using cloud systems, delivering access to social media, entertainment apps and voice recognition systems.
3. Aging population
Last year introduced 22 new technologies alone.
4. Gender diversity
Must serve the women customer base and employ women talent.
Women control 65% of consumer spending overall, and women make the final decision on the purchase of more than 60% of cars.
In the past the vast majority of Nissan employees were men – while 60% of car purchase decisions are made by women! This means that Nissan was missing out on many business opportunities by having an overwhelmingly male workforce and management.
In Japan, 7% of Nissan’s managers are women, more than double the average for large Japanese manufacturers, in the past the ratio at Nissan of women in management was 3%, so we have already increased the ratio. Aim to increase the ratio of women managers to 10% by 2017. More women managers ensure that women take part in product management and planning – this is important since the majority of purchase decisions are taken by women.
Nissan has a program to make dealerships more woman friendly.
Carlos Ghosn – watch on YouTube here:
Carlos Ghosn – Question and answers
Q: vision for Google’s Android system
Carlos Ghosn: autonomous driving and self driving is very important, and every major car manufacturer is working with Google. Every car manufacturer wants to keep control of its own products. Car makers do not want to become just maker of simple hardware, but wants to control the products.
A baby born today has a 50% chance to live longer than 100 years, on average people lose their drivers license sometime around 80 years age. Therefore technology has to change, and technology can help older generation to stay mobile for a longer time.
Q: what is your favorite exchange rate
Carlos Ghosn: I have always been consistent, that US$ 1 = YEN 100 is neutral. We don’t want to have a handicap from the exchange rate. An exchange rate of 100 is perfect to allow us to do our job. YEN/$ = 100 is a neutral position
Q: do you intend to go into politics and become President of Lebanon?
Carlos Ghosn: Very low probability. I am being accused of accumulating too many jobs. I have just been renewed for another period of four years as CEO of Renault by the shareholder meeting in May 2014. I can make my best contributions where I am now.
Q: to you prioritize profit margin or market share? what is your strategy for emerging markets? what are your problems in global platforms?
Carlos Ghosn: Power 88 = 8% profit margin, 8% global market share. Profit enables growth.
We go to every emerging market. Leadership must begin in emerging markets. We are No. 1 Japanese brand in China. We are aiming to become No. 1 Japanese brand in Russia, in Europe and in South America, particularly in Brazil.
We are fighting to become the 2nd brand in Japan.
Growth without profit will not last. Without profit we cannot grow, we cannot invest.
The long term trend counts. To understand what Nissan is doing you must look at the long-term trend:
- Nissan in 1999: 2.4 million cars, 2 Trillion Yen debt
- Nissan in 2014: 5.2 million cars sold, 1 Trillion cash, presence in twice as many countries
We are creating joint platforms with Renault, Daimler, Mitsubishi, and Ashok Leyland in India.
We are the only company which is successful and productive with alliances. What counts are not handshakes of top management in front of cameras, but the actual platforms and cooperation projects we deliver.
The Renault-Nissan Alliance is a world champion in alliances.
The automotive industry today is an industry of scale. The largest players are the most competitive and have the highest profits.
I am not saying that this will always be like this, this could change. But today the automotive industry is an industry of scale, where to be successful we must offer a large range of products in different product segments.
Success for small automotive companies is very difficult, they have to offer a extremely special, hugely attractive model to compete.
Q: any comments about your salary
Carlos Ghosn: What is the question about my salary? The question about my salary comes up regularly at every shareholder meeting and is a kind of ritual. We follow systematic principles. Nissan is in search for global talent.
As example the head of Infinity last week left us for Cadillac. There is a global fight for talent, remuneration should not be a handicap but an asset.
I have no discretion on the market for talent.
We take into account the efficiency of the company, and also local sensitivities, but we have to be competitive. We cannot say: “we need this expert, but we cannot pay him”.
We have YEN 1 trillion cash and we are making US$ 6-7 billion profit – saying “we want this talent no matter what” is a sign of vigor and vitality.
We will see more and more global professional talent in Japan with established record.
Q: Why is it important to have women in all roles of leadership, and do you have examples
Carlos Ghosn: I support the Japanese Government in aiming for more women in management.
Concerning Nissan: 60% of all car buyers are women, and what women are looking for in a car is very different to what men are looking for. Therefore women need to have a strong role in designing cars. We need female designers, female engineers, female marketers. Women in decision making positions is not optional but mandatory.
- 80% of women going to a car dealer want to have a woman sales person, 20% don’t care.
- 50% of men prefer a woman, 50% prefer a man sales person.
Therefore logically, we should have lots of women sales people in our stores, at least 50%. However, at present we only have about 15% women sales people in our stores. This is not logical and must change.
Q: Green cars?
Carlos Ghosn: I believe electric cars are most important, and US and China will lead. Infrastructure investments and the speed of development for infrastructure are an issue.
Infrastructure is a much bigger challenge for fuel cell cars than for electric cars. Selling 500-1000 cars is not the issue, 100,000 – 200,000 is the issue.
Q: Is there friction between Nissan’s mono tsukuri culture, and Renault’s freedom to work less?
Carlos Ghosn: The two companies contribute together. Both companies have successes. Renault has a very big success with the Dacia platform, the M-1 platform, is selling more than 1 million cars, and is unique. Renault also has a very strong mono tsukuri culture.
As another example, Renault will now move into China on the basis of Nissan’s business platform in China. Renault will copycat Nissan’s plans of building business in China.
Q: Departure of Nissan Infiniti Chief Johan de Nysschen, and search for successor:
Carlos Ghosn: we have a global fight for talent. 49% of Nissan’s top management have 13 different citizenships. Its not that 49% are all French. Diversity is out strength. There is war for talent, and that is normal.
We have to accept that some talent leaves us when the mission is finished. We have people dedicated on searching for global talent all the time. You can be sure that this job will be soon filled again.
Q: electrical car charging infrastructure:
Carlos Ghosn: it is in our interest to have the highest number of electrical cars. We are pushing towards standardized charging infrastructure. We all want to promote zero emission cars.
Q: Tesla has made patents free: will you use Tesla’s patents?
Carlos Ghosn: we are first in electrical cars, we have enough patents, we have no reason not to use Tesla’s patents, but we don’t.
Q: conflict between growth and quality issues
Carlos Ghosn: The most important is to take any problem immediately out of the hands of the consumer. That is why we see more recalls recently. First we recall and take the problem away from the consumer, and then we solve the problem.
We have an Executive Vice-President for consumer satisfaction and quality, who has full power to reduce all risks on quality.
Q: you want to increase the ratio of women in management to 10% by 2017, and Prime-Minister Abe wants 30% women in management by 2020.
Carlos Ghosn: I am very modest, and Prime Minister Abe is very ambitious. I do not want a burst of women in management with failures afterwards. I want to advance safely without massacres. I am prudent and conservative.
We had less than 2% of woman managers, today we have a solid 7%, and I want to go a solid 10% of woman managers. I don’t want a “flavor of the day”, I want solid stable progress.
Q: how does your strategy regarding autonomous driving differ from your competitors?
Carlos Ghosn: we do not know what our competitors are doing. Everyone moves to autonomous driving, because consumers want:
- drivers want more time
- drivers want more pleasant time
We want to be the pioneers, the battle is to be first and to associate the image of being No. 1 to the brand. We are not aiming to be late with a more perfect product, we want to be first with significant autonomous driving features.
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