The Ultimate Destination for Any OEMThu, 09/01/2016 - 15:23
Q: How has Nissan’s relationship with Mexico evolved through the years?
A: Nissan CIVAC, the company’s first manufacturing plant outside Japan, celebrated its 50th anniversary on May 12, 2016. When we suggested bringing the plant to Mexico, specifically to Cuernavaca, it was a controversial decision. I believe it could not have worked out better. Nissan began its connection to Mexico boosted by the magnificent relationship between Mexico and Japan. Nissan’s presence kept growing, resulting in the construction of the A1 plant in Aguascalientes. Governor Carlos Lozano de la Torre was the Minister of Economic Development for Aguascalientes at the time and a crucial figure in the consolidation of this investment. The inauguration of the A2 plant in 2013 was a natural next step. This site is now dedicated to export operations for Brazil, Canada and the US, producing the Nissan Sentra model. We are particularly proud of Nissan’s collaboration with Daimler for the new COMPAS plant in Aguascalientes, which will be the first to tackle the premium manufacturing market, starting with our Infiniti models in 2017 and later adding Mercedes-Benz models in 2018.
Alongside Vesta, we developed our Douki Seisan Park for suppliers in Aguascalientes and we have a 74,000ft2 warehouse specialized in spare-part distribution. Through this center, we can address the needs of any Nissan plant in the world and cater to importers across the globe. Our projects have incentivized new investments from other automakers, promoting the national automotive industry. Nissan is the biggest automotive manufacturer in Mexico, having produced more than 820,000 cars by the end of 2015. Unlike the rest of the market, 37 percent of our production stayed in the country last year. This helped us attain a significant market share. Five Nissan models are among the top 10 vehicles sold in the country.
Q: What made Mexico such an ideal location for Nissan?
A: One of the main advantages was Mexico’s location in the Americas, next to the largest economy in the world. The country enjoys immediate access to the Atlantic and Pacific Oceans, facilitating exports and imports. Mexico is a signatory to an array of free-trade agreements including the Trans-Pacific Partnership (TPP) deal. In terms of infrastructure, Mexico has excellent rail, road and port access although that is only sufficient for the current 3.4-million vehicle production. Nissan also decided to develop further logistics operations in the port of Mazatlan, becoming the first automotive company to do this. The port will receive all our products from Japan.
Education is an important issue in Mexico and although some companies might struggle on this front, Nissan developed a strong recruitment base in Aguascalientes with the support of Governor Lozano de la Torre. Nissan employs almost 45 percent of the state’s graduates. We also created Nissan University so our teams could receive more specialized training than what was available at any institution. There are three times more engineering graduates in Mexico than in the US, representing an immense talent pool for OEMs.
Q: What was Nissan’s contribution to advancing Mexico as an automotive powerhouse?
A: Recent growth has fostered the development of a strong supply chain in the country. This sector now represents the largest gross market for the country with US$81.8 billion by the end of 2015 and eight percent of the manufacturing GDP, according to Deloitte. This means that Nissan and its providers have been responsible for approximately 1.5 percent of the country’s GDP.
Q: What is your view of Mexico’s position in the global automotive market?
A: The biggest area of opportunity in the country is supply chain development. The industry would benefit from the government becoming more involved. Nissan has a solid Tier 1 supplier base since many companies accompanied the OEMs to their new plants. Further down the supply chain there has been a surprising deficit. Most raw materials are imported, including electronics, plastics, steel and chemicals. This represents the largest proportion of total cost for car production. Mexico is competitive in terms of labor and energy prices among other aspects but these only represent eight percent of a vehicle’s cost. To boost the country’s competitiveness there must be a government-led program to support companies that are specialized in raw material production. The manufacturing segment has been consolidated in line with several investments but Mexico still has to prove it can reach the 2 million mark in domestic sales to continue attracting new companies.
Q: How did Nissan’s Power 88 initiative affect its Mexican operations?
A: Achieving eight percent operating profit has been our main goal, guaranteeing enough resources to keep investing in the company. The 8 percent global market share is equally important but depends on the nature of each market. We have been struggling to satisfy the overwhelming demand in Mexico so losing a small percentage of participation is natural. We are producing approximately 4,000 units of the Nissan Frontier monthly, for example, while we have a waiting list of almost 8,000. We have encouraged our sales department to keep our production sites at full capacity.
Q: How has Nissan balanced its image as an affordable brand with its foray into the high-end segment with the new Maxima and the 370Z?
A: While we previously sold three or four 370Z units a year, we are now marketing more than 20. This might seem like a small number but it shows the public’s openness to our high-performance models. Similarly, the new Nissan Maxima is exceeding sales targets thanks to its high design and performance standards. Our signature model Nissan GT-R has not yet arrived in Mexico but will probably be a priority this year. We want to maintain the rational side of Nissan while focusing more on emotional factors and new technology in our vehicles. Besides electric technology, autonomous features will also become standard in every car in a few years. Many of these advances are already available in some of our models and they will be the basis for future developments.
Q: What strategy has Nissan’s employed for the growing electric vehicle market?
A: We launched the Leaf in July 2014, when there were still doubts about the success of an electric model in the market. However, at Nissan we do not believe in the future, we make it. We cannot be sure what the future will hold for Mexico but electric technology is certainly part of it. Electric technology is expensive and although we have invested in infrastructure, many deficiencies remain. More involvement from the Federal Electricity Commission (CFE) has helped but it is not enough to change the infrastructure radically. Nissan signed an agreement with BMW to collaborate on these developments and we expect GM and Tesla to contribute to the project. Today, more than 150 charging points are available in the country plus at least one fast-charging station per state. We have also developed an app to help drivers find the closest charging point, whether it belongs to Nissan or BMW.
Following changes to the No Drive Day vehicle restrictions due to air pollution, demand for the Leaf increased exponentially. It is sad this growth is motivated by an unpleasant situation, especially if the general attitude toward electric vehicles remains unaltered. The situation is boosting the electric vehicle market, nonetheless, and it has fostered opportunities for Nissan to collaborate with different regional governments.
Q: What model diversification opportunities exist for Nissan’s operations?
A: Our plants were designed to support our diverse portfolio. We have been slowing down the production of new models because of the high demand of our current lineup. Before inaugurating the A2 plant, we sold approximately 1,200 Sentra vehicles in Mexico per month but now we have exceeded 3,500 units. We need to increase production capacity, even greater than our current rate of one vehicle produced every 38 seconds.