Mitsubishi Motors deal may help Nissan crack emerging Asia at last

Fri May 13, 2016 10:08am EDT
 
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By Aditi Shah and Norihiko Shirouzu

NEW DELHI/BEIJING (Reuters) - Despite years of trying, Asia's fast-growing emerging markets have proved elusive for Japan's Nissan Motor Co (7201.T: Quote), one reason behind its $2.2 billion move this week to take control of scandal-hit Mitsubishi Motors Corp (7211.T: Quote).

Nissan has invested aggressively in countries including Indonesia, deploying targeted models and beefing up distribution in Southeast Asia's largest car market. After three decades, in 2012, it revived low-cost brand Datsun.

But its market share in Indonesia is just 2.5 percent, compared with smaller rival Mitsubishi's 11 percent, in part because of a distribution network that analysts say is still insufficiently broad.

Turbo-charging its business there and in other growing economies in the region is one clear motivation for Nissan, which is pressing ahead with a plan to take a 34 percent stake in Mitsubishi Motors, even as the group tries to recover from damaging revelations over misleading fuel economy data.

"In ASEAN, (Mitsubishi) makes more than 7 percent operating margins. In 2015, we had a negative margin," Nissan Chief Executive Carlos Ghosn told analysts after the Mitsubishi deal was announced. A negative gross profit margin means Nissan is losing money on each sale.

"Their position of strength is our position of weakness. In ASEAN, they can support us a lot," he said.

Boosting their presence in emerging markets is critical for global automakers, but even more so for Nissan, overpowered by Toyota (7203.T: Quote) and its sister brand Daihatsu in Indonesia and by Suzuki in India, for example, where Suzuki accounts for one in every two cars sold.

Mitsubishi, meanwhile, has a more established name in Southeast Asia, where it has a long history producing and marketing trucks.   Continued...

 
Nissan Motor's Chief Executive Carlos Ghosn (L) shakes hands with Mitsubishi Motors Corp.'s President Osamu Masuko at the end of their joint news conference in Tokyo December 14, 2010. REUTERS/Toru Hanai/File Photo