Nissan to Play Bigger Role in Southeast Asian Markets

YOKOHAMA, Japan – Operating in the shadow of the giant Chinese car market, Southeast Asian auto makers, mostly Japanese, have carved a niche in the region that provides not only a buffer against exchange-rate fluctuations but also an export base for models no longer competitive to build in Japan.

Nissan, a relative latecomer to the region, hopes to boost its market share to 15% in fiscal 2016 when the auto maker’s Power 88 business plan is fully implemented. Nissan’s fiscal-2011 share was about 10%.

“We hope to sell 500,000 vehicles, up from a projected 280,000 last year,” says Takayuki Kimura, who concurrently serves as president of Nissan Motor (Thailand) and Nissan Motor Asia Pacific. “And we plan to expand production to 700,000 units.”

In the same fiscal-2016 timeframe, Kimura estimates exports to countries outside the region will grow to 200,000 units, nearly double current levels that consist mainly of Frontier pickup trucks and March hatchbacks. Throughout most of Asia, the Frontier is sold as the Navara.

At present, production capacity, mostly in Thailand and Indonesia, stands at 400,000 units a year. In addition to vehicle plants in Samut Prakan, central Thailand, and West Java provinces in Indonesia, Nissan operates two small factories in Malaysia and Vietnam.

In Thailand, the Japanese auto maker shifted Navara pickup production to Mitsubishi’s Laem Chabang plant last spring. Mitsubishi is producing the 1-ton truck for Nissan on a consignment basis, annualized at about 50,000 units.

Japanese auto makers have long dominated the Southeast Asian market. In Thailand and Indonesia, they hold a 90% share.

When the first big wave of Japanese investment came to Southeast Asia in the early 1990s, Nissan was experiencing financial difficulties and unable to move into the region, unlike Toyota, Isuzu and Mitsubishi.

“We’ve been handicapped,” Kimura says, “but we have a good brand and good product moving forward.”

Nissan will continue to place emphasis on the Thai and Indonesian markets, he says, “particularly Indonesia, where car ownership stands at only 40 units per 1,000 people. Given that Indonesia claims the world’s fourth-largest population (240 million), growth potential is enormous.”

The executive predicts the Indonesian market will grow to nearly 1.5 million vehicle sales in fiscal 2017, up from an estimated 1 million in 2012, while total demand among the 10 member countries of the Association of Southeast Asian Nations will approach 3.5 million. Kimura expects production capacity to increase to 5 million units.

Nissan is investing 11 billion Thai baht ($369.5 million) in a second Thai assembly plant in Samut Prakan. Scheduled to go into operation in August 2014, the factory will be able to produce 150,000 vehicles annually when it reaches capacity the following year.

Current plans call for production of pickup trucks, although Kimura says that could change depending on market conditions.

Nissan’s existing Thai plant, also in Samut Prakan, has an annual capacity of 220,000 units including both the Navara/Frontier pickup and B- through D-segment cars, namely the March, Almera, Sylphy and Teana.

The March, which went into production in spring 2010, was the first Thai eco-car to be built in the region. With the model’s launch, Nissan shifted production of the vehicle completely outside Japan. The March, which is sold as the Micra in China, Europe and Australia, now is produced in China, India and Mexico.

PT Nissan Indonesia will open a second plant in September with initial annual capacity of 75,000 units, mostly SUVs. The auto maker plans to boost capacity at the factory, its second in Purwakarta, to 150,000 by fiscal 2016, raising total Indonesian capacity to 250,000 a year.

The older Indonesian plant can produce 100,000 vehicles annually including the Serena, Grand Livina and Evalia multipurpose vehicles, along with the X-Trail cross/utility vehicle, Juke CUV and March sedan.

Nissan’s investment in the new plant and an upgrade of the older facility is ¥58 billion ($619 million).

Interchanging models between plants would be difficult, Kimura says, because the respective body types vary substantially: Nissan (Thailand) produces mainly pickup trucks and sedans, while PT Nissan Indonesia’s focus is on MPVs with three rows of seats.

Nissan, like others including market-leader Toyota, continues to expand its regional supply base; it currently has 180 suppliers in Thailand and 75 in Indonesia.

Among them is Nissan Powertrain Thailand, which makes engines for the auto maker’s Indonesian and Thai operations. The subsidiary, formerly known as Thai Automotive Industry Co., produces an estimated 700,000 engines annually, both gasoline and diesel.

Seventy percent of pickups built by Nissan Thailand, estimated at half its vehicle production, are diesels equipped with Nissan’s YD diesel. The remainder, including all sedans, hatchbacks, MPVs and SUVs produced in Thailand and Indonesia, are fitted with 1.5L gasoline engines.

Kimura says PT Nissan Indonesia will begin engine assembly this year. Initially, key components (believed to include cylinder blocks and cylinder heads) will be sourced from Nissan Powertrain Thailand.

In the case of transmissions, manual gearboxes for Nissan plants in the ASEAN region are imported from Renault in France, while continuous variable transmissions are sourced from JATCO in Japan.

JATCO will open a TB7.6 billion ($255 million) plant in mid-2013. Located in Chonburi, Thailand, the facility, to be run by JATCO (Thailand), will be able to produce 500,000 CVTs, mainly for Nissan’s Thai and Indonesian operations.

The regional content for the March now stands at 90%. Other models soon will follow, including the Navara pickup and Sylphy sedan, Kimura says.

Nissan does not sell its Thai and Malaysian models in North America and Europe. However, it does export Frontier pickups to Latin America and March hatchbacks to Japan from its Samur Prakan plant. Through the first eight months of the current fiscal year, Nissan sold 24,385 Thai-built Marches in Japan.

Outside of Southeast Asia, Nissan Motor India supplies Micras to Europe, while Nissan Motor Iberica produces pickup trucks for the market. Nissan Mexicana provides pickup trucks to the U.S. and Canada, the Middle East and several Pacific Rim countries.

Looking to the future, Kimura believes labor costs in the Southeast Asian region are the most competitive in the world, even compared with China. And the political situation is more stable, at least for Japanese manufacturers. He does not expect non-Japanese brands to make a big advance into the market.

“Competition will remain mostly among Japanese OEMs,” he says.