Nissan Motor Co., Japan’s third largest car maker, will raise global component purchases from low-cost countries such as China and India to as much as 24% of the total, from 14% after profit fell for the first time in seven years last year, said Carlos Ghosn Nissan’s CEO, in an interview in Singapore.
“Frankly, we have no choice... If you don’t transfer part of your supply to extremely competitive countries, then there is no way you are going to be competitive in the market,” Ghosn said on Sunday.
Saving on the company’s biggest expense may help Nissan achieve its profit goals this year, after net income fell and Honda Motor Co. took over Japan’s second largest auto maker spot.
Exports of Indian-made parts may rise almost six fold to $40 billion (Rs1.64 trillion) by 2015 from about $6.7 billion in 2003 because of rising demand from auto makers including General Motors Corp., according to McKinsey & Co.
General Motors expects to buy Indian automobile parts worth $1 billion a year within four or five years, said Nick Reilly, the car maker’s president in charge of the Asia Pacific region, in an interview on 17 April.
Auto parts cost half as much in India as in Europe, he said.
Tokyo-based Nissan expects net income will rise to 480 billion yen ($3.9 billion) in the 12 months ended 31 March, from 460.8 billion yen a year earlier. Sales will probably fall 1.6 % to 10.3 trillion yen. The car maker expects to sell 3.7 million vehicles this business year.
Nissan’s operating margin of 7.42% is lower than Honda’s at 7.68% and Toyota Motor Corp.’s at 9.35%, according to Bloomberg data.
“When you reduce your purchasing cost, sourcing is one of the tools,” Ghosn said.
Shares of Nissan, 44.3% owned by Renault SA, fell 0.8% to 1,319 yen on Friday in Tokyo. Nissan missed earnings and sales forecasts last year because of a lack of new models in the US and Japan, its two biggest markets. Nissan also delayed a goal of selling 4.2 million vehicles worldwide by one year, to the 12 months ending March 2010.
The car maker didn’t introduce any Nissan-brand vehicles for 15 months and went 18 months without any new Infiniti-brand models in the US, its most profitable market.
Ghosn said Nissan will consider introducing a car priced as low as $3,000 depending on the success of similar low-cost models planned by companies including Tata Motors Ltd. The Indian car maker plans to introduce a car priced as low as Rs one lakh ($2,500) next year, which will make it the nation’s cheapest automobile.
“If this represents an opportunity, then there is no doubt that we will be coming with a product like this in the future,” Ghosn said.
Leslie Tan in Singapore contributed to this story.