Nissan Races to Make Smaller, Cheaper Cars David Rogers, Bobby Roeckner, Aubrie Stechschulte, David Warsinskey, Jason Scott “To sell an expensive- looking car for the price of no- frill models, and somehow make a profit on it.” Demand of Smaller Vehicles is increasing because of rising gas prices. Drivers trading “Gas Guzzling” SUV’s for smaller models. New Mission Demand is expected to grow 30% to 27 million vehicles by 2013 SUV’s demand is expected to drop 4% to 10 million vehicles. This new shift is a challenge that no car maker has managed to make yet. Trucks and SUV’s earn 10%- 20% profit margins. About $2500- $5000 Best selling smaller cars earn just 2%3%. About $300 per car. Most makers consider to be lucky to break even on small cars. Nissan is aiming to make stylish cars with a starter price of $7000- $10000. Eventually reduce price to $5000. Nissan is exploring making a $3000 car with the help of electric rickshaws makers. Goals Nissan’s plan to get under $7000 is controversial. The quality of the car will come into question. Cost structure is said to be not feasible. Nissan’s Chief Product Strategist Carlos Tavares is determined to accomplish this goal. Nissan was on the brink of bankruptcy in 1999. To turn profits around, they relied on big models that have high margins in the US. At the same time they fell behind in the world market. Last year they only offered one model in India, which sold only 199 cars. Nissan used the modeling techniques of the Renault’s Logan to design the Nissan Tiida. Used simpler parts: 1. Continuous bumper and grill 2. Similar left and right mirrors 3. Less curved windshields This results in lower costs Nissan’s Secret Weapon Nissan’s Tiida Vs. Renault’s Logan Nissan is also moving production to lowcost areas. Using more local suppliers in place of longtime Japanese suppliers. This year at the Thailand plant, Nissan cut imported Japanese parts from 30% to 10%. Questions?