Though one could question whether a brand should try to re-enter a market having failed to draw customers the first time, is there anything left worth salvaging here? With the latest announcement of Nissan’s reentry, this is a question on everyone’s mind. To be fair, Nissan Sunny’s failure to launch was eons ago, a tale of times long past, the simpler days where cars were luxuries, market size small and demand patchy. Can Nissan wipe the slate clean and start anew? The answer resoundingly seems to be yes.
To share some background: Nissan Sunny started to locally assemble in 1997 under collaboration between Ghandhara and Nissan Motors. It marks the early years of auto manufacturing in Pakistan, the industry only just coming out of the tentacles of nationalisation.
The three Japanese based local assemblers established their roots fast. Honda Civic and Toyota Corolla were being assembled that were in the same engine category as Sunny, while the more popular Suzuki Mehran, Khyber, Margala and Bolan were in the low-engine categories. On average, each variant sold over 5,500 units in 1996 where Sunny started off operations with the production of 599 units in 1997.
But the car had a short and intermittent run. Between 1997 and 2005, the plant manufactured merely 2,573 cars and sold even less (1,158 units). Low volumes led to the inability of the company to meet localisation targets.
There are a number of reasons why Sunny couldn’t achieve the requisite volumes. The car though had a bit of a cult following, was pricier than others in the same 1300cc and above range. Moreover, the Ghandhara sales and marketing team may not have marketed the product as well as they should have. Some also argue that the ‘resale mentality’ in Pakistan may have led to the demise of Sunny. The fact that there were less on the road, and volumes were significantly low; the resale value was not as much as the Hondas and Toyotas flagships that had higher production.
With that said, a lot is different this time. It helps that there is a conducive government policy to open up the market to new players. This is bringing not just Nissan back into the folds, but Hyundai, Kia and potentially Renault cars, apart from other Chinese variety. Local sales have grown dramatically over the past two years, together with a burgeoning demand for used cars.
Back in Jun-17, it was estimated that car sales could reach 600,000 by 2023 (Read: Playing your cars right: an update – published on June 05, 2017). Since then, many other similar numbers have been quoted in the media. In an interview with BR Research in Jan-18, Indus Motor CEO himself estimated car sales to go up to 500,000 by 2022.
Consumer appetite for new cars is also evident not just from the volume of cars bought but from a wide range and variety of cars imported. From Toyota Vitz and Aqua, to Suzuki Every and Alto to Honda Vezel to Diahusti Mira and Move, to Nissan Dayz and Moco; the list is long.
Meanwhile, the incredible reception of new locally assembled vehicles like Suzuki Wagon-R (grew 75% in 8MFY18), Honda BR-V (already sold more than 6000 units since July17; started production in Apr-17) and Toyota Fortuner (sales grew four-folds in 8MFY18) is also an important indicator. Greater demand has also come at the back of the arrival of ride sharing apps like Uber and Careem, which are affordable and convenient options for congested city dwellers with and without cars.
For years, car buyers have complained that local automakers add cosmetic changes to cars, merely face-lifting when really the focus should be an improvement in the quality, usability and functionality of these cars. This is also a major reason why upcoming new players will get a fighting chance.
The Ghandhara plant has a capacity of 6000 vehicles and Ghandhara’s Rs4.5 billion investments will go into upgrading this plant over the next four years. Nissan is bringing Datsun models to Pakistan, which has been introduced in other Asian markets to nominal success.
The key to survival is to introduce the right cars—preferably smaller—and localise as fast as they can to become competitive.
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