From a share-price perspective, the start of the new year has not been kind to European automakers and their suppliers. Credit wobbles have critically undermined what were already relatively fragile sales forecasts for the US and Europe, a new round of lowered TIV (Total Industry Volume) projections perhaps unfairly affecting what is a broad spectrum of (very differently positioned) vehicle and parts producers. But, as we know, very often when markets jitter, the baby can momentarily been thrown out with the bath water, until analysts once again endeavour to re-inject a sense of proportion for each company.
In reality of course, each of the European producers sits within in its own very specific set of circumstances, each able to deal with present macro-economic difficulties relative to their own individual strengths and weaknesses.
However, unsurprisingly, greatest attention is focused on those with greater exposure, and amongst the European VM Big 6, top of the tree is Renault, and the severe headwinds facing the Nissan element of the R-N Alliance that has propped-up the French company in recent times.
Infact, given that the general automobiles & parts sector experienced a shareprice drop of approximately between 7% and 9%, Renault's 7.5% drop (which has since slightly risen) could be viewed as fortunate, probably due to the fact that Renault is well placed as a low C02 producer across its corporate fleet.
Of course beyond the perhaps over-hyped 'good news' of Renault's low-cost car efforts, central issues have been and will continue to be European and US performance, which when faltering diminish traction in emergent markets. Both the Renault and Nissan brands have much to do to turnaround sales slippage in their respective European and US prime markets.
Present woes are not a surprise, both brands have been off-the-pace compared to competitors products for some time. Whilst the man at the top (Ghosn) may have been absorbed by strategic initiatives such as the recent 25% AvtoVaz stake and platform application issues, it seems general 'domestic' product management has suffered - the more conservative styling strategy floundering with little in the way of impactful new product. Clio nor Scenic have had the impact of their forebears and whilst there's been the reletively recent launch of New Laguna and New Kangoo, their contribution will assist only marginally against a broader presently 'low profile' product mix. A measure of re-bound hopefully due with next generation Megane 3 (still some time away) but this again may look only average (to European eyes at least) compared to previous incarnations.
We suspect Renault's conservative aesthetic policy - Planning's Palata 'beating' Design's Le Quement - was employed so as to assist global growth ambitions in emergent markets, essentially offering a visually mature portfolio vis a vis Ford, Opel, the Japanese etc. Whether this longer term driven design policy delivers the 30% growth over the next 2 years promised remains to be seen, since it relies so heavily on said emergent regions (esp E. Europe, Middle East, North Africa & Asia) leaning on Renault's long-standing reputation as opposed to 'pure product panache'. [NB Indian alliance strategy falters with disbandment of Mahindra evaluation partnership on 4 Lakh car, though Logan production continues].
The real near-term issue is however Nissan and the US, with major efforts needed here if the assistance in the Group's "2009 Commitment" is to stay on track. When interviewed by the Detroit Free Press, Mark McNabb (Snr V-P S&M) gave a typically expected upbeat overview of the year ahead citing the 4.8% rise in sales for 2007 and the promise of a second new Cross-Overs due in 2008 to accompany Rogue. But the brand's real problem lies with small cars, specifically the Versa and Sentra, which have compromised personalities and aren't wholly understood by the public. The former strikes infomed buyers as a badge-engineered Renault, even if not strictly true, though a renamed Tiida from Japan, whilst the latter appears to be a Renault (package) overlayed with Toyota Prius (detailing). The two basically don't share design similarities and even in their own right aren't visually finessed, indicating over-compromised, cost-down engineering.
The truth is that small cars are critically important right now, given that the likes of Toyota, Honda, Hyundai offer a better looking broader small car portfolio. Remember Toyota offers Scion too. This means Nissan relies heavily on mid-size Altima and Maxima, now mid lifecycle and providing diminishing returns into the near future.As for Infiniti, it is really only the G-Coupe and 2 Cross-Overs that offer real attraction, the sedans don't compare to Lexus peers, so Infiniti division sales will have to be driven from new market entries in Russia and Far East, these early days, once again, offering little in terms of additional immediate revenue.
We believe that Nissan USA must attend to it's small car needs, and US execs should have long been balloting for resource and expenditure in this area. They may well have done, but the lack of commitment from Japan is ironic given the roots of Nissan's success in the US was in small cars. The Tiida is an evidently odd looking car, its globally engineered platform winning the day over the far more attractive Note, March and Cube - the last of which is a true Scion beater...had it only been engineered to meet US regulations!
A great deal relies on Nissan USA's immediate performance to underpin the global R-N growth strategy. And as that stands it needs more than the revenue stream of a few Cross-Overs.
'investment-auto-motives' believes Nissan must step-back and look at its fundamental place (and consumer perceptions) in this critically important market. It must develop a third character - beyond mainstream Nissan and premium Infiniti - encompassing a notional funky/youthful affordable sub-brand; even if not a fully fledged seperate identity as Toyota did with Scion. It means tentative steps with adapted/new product and retailing directions that better connect with buyers wanting something small and interesting, not small and embarrassing.
Given that speed is of the essence, it may mean initially adapting Versa and Sentra (mirroring the model adaption policy that first introduced Infiniti in the early 90s). The creation of production siblings that demonstrate low-cost , high impact appeal, In the medium term introducing a new generation or US regulations engineered Cube to accompany and perhaps the exploitation of the Logan Estate platform to produce a Skoda Roomster type product is another possibility.
Every avenue should be considered to develop a GenY portfolio saleable to those far older than just GenYers, targeting the young and the young at heart.
Given the 2 year deadline set by Ghosn, time is of the essence and benchmark product change at best takes 12 months. In the meantime Nissan US could begin to promote a new character dimensions, just as Honda does from product, technology and corporate angles.
The reluctance to at least indicate 2008 US full year sales projects highlights the weakness the division faces. Under-pinning US operations should start immediately, utilising more than a possible new round of discounting and incentives.