Nissan hoping to reverse its slide by spending big on tech
YOKOHAMA, JAPAN - After two years of faltering sales and a fallout from the 2018 arrest of ex-chairman Carlos Ghosn, Nissan's newly installed management is at another crossroads: how to get Japan's second-largest car company out of a rut and beyond the shadow of the disgraced executive who drove its strategy for decades.
It's a tall order, particularly considering Nissan's hefty pile of debt, about 8.3 trillion yen (R126 billion), which is double what it had 10 years ago, as well as the company’s lackluster showing in Europe, and its UK factory supply chain woes.
Nissan is also facing unparalleled competition, especially in the realm of advanced autonomous driving. The carmaker spends about half the amount - 1 trillion yen - that Toyota outlays annually on R&D and carmakers in general lag behind capital-rich tech firms such as Alphabet, which has spent more than $1 billion on self-driving technology through subsidiary Waymo.
Nissan Senior Vice President Takao Asami is cognisant of the challenges.
"Though the evolution of automotive technologies today is more competitive than ever, we have an innate sense that we need to persist," he said in an interview. "If we lose out in terms of technology, we're going to lose out in terms of business."
Asami also said there has "lately been a lot of discussion internally about what our DNA is, what areas we can dig deep into and win." One idea surfacing within the company's executive committee is that Nissan needs to go back to its roots, doubling down on R&D to revive a perception that existed before Ghosn's turn-of-the-century arrival of Nissan as the country's leading automaker when it comes to next-generation technologies.
That means reaching into shallow coffers to make sure Nissan remains ahead of the competition in the two technological changes sweeping the auto industry: electrification and autonomous driving.
By fiscal year 2023, Nissan aims to sell 1 million pure electric and electric powertrain-fitted vehicles, and 1.5 million vehicles equipped with ProPilot, the company's semi-autonomous driving system, annually. Toyota is targeting 5.5 million electric vehicles a year by 2025 and is equipping most of its new vehicles sold in major markets with autonomous features.
ProPilot, which includes features that hold a vehicle in a single lane and match its speed to surrounding traffic, is highlighted by industry experts as a technology that could prove pivotal for Nissan, with the potential to boost the automaker's sales and brand image if it can keep ample funding flowing into its development.
Nissan "stands out" in how it has brought autonomous features to the mass market, said Deloitte Tohmatsu Consulting partner Lei Zhou. The carmaker introduced ProPilot into a wide range of models early on, which has provided the scale to bring costs down, Zhou said.
Autonomous driving is typically defined on a five-step scale, ranging from zero, where cars issue automated warnings, to level 5, where they will be able to handle all roads and conditions without human intervention. Technologies commercially available in vehicles today - including Nissan's ProPilot - max out at 2, meaning an automated system can take control of certain functions, but drivers must continuously monitor and be prepared to jump in.
Tech giants in the United States and China are more advanced when it comes to the computer-science-heavy arena of advanced level 4 or level 5 autonomous driving.
Investing in lower-level technologies comes with its own set of challenges, too. Though easier to make profitable now, the technologies run the risk of quickly becoming standardised. "ProPilot's features are considered advanced within level 2 systems today but in the blink of an eye, they'll become common features instead of selling points," Bloomberg Intelligence analyst Tatsuo Yoshida said.
Nissan was one of Japan's industrial pioneers, carving out its place alongside Toyota by building a reputation as an early adopter of new automotive technologies. But there were some big missteps. In the late 1980s, Nissan rolled out forgettable sedans that were more expensive than their rivals. By 1999, Nissan was on the verge of bankruptcy and needed emergency loans from the government to stave off collapse.
Ghosn, dispatched by Renault to Tokyo after the French company bought a strategic stake, righted the ship, his slash-and-burn approach returning Nissan to profit ahead of projections. But under Ghosn, Nissan also expanded globally at breakneck speed, diving into markets such as India and China and steeply discounting vehicles to increase market share.
After Ghosn was arrested in late 2018 for alleged financial crimes, Nissan was left to deal with an increasingly strained alliance with Renault and Mitsubishi Motors as well as the flight of a number of its most senior executives.
In May, Nissan unveiled a turnaround plan that involved a pronounced step away from the tenets pushed by its former chairman. Instead, the carmaker would cut global capacity by double digits, wind down incentives and train resources on select markets.
Although the pandemic shaved about 15 percent off global car sales last year and Nissan is forecasting an operating loss of 340 billion yen for the fiscal year ending March, the company has not decreased the amount of funding it's allocating to technological development, Asami said. He says figuring out how to move efficiently forward is both crucial and the company's "biggest headache."
For now, its strategy is to focus on spreading ProPilot widely across models rather than pushing into higher-level autonomous technologies. It also plans to tap funds brought in by vehicles equipped with ProPilot today to build out tomorrow's next-generation of features.
This is about "the future and creating a company based on core technologies," Asami said. "Even with limited resources we're going to continue putting a hammer to the rock."