India

Why Nissan is trying to jumpstart Datsun

July 16, 2013: 10:23 AM ET

The dormant brand doesn't have the best reputation in the West. But that may not matter.

By Doron Levin

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FORTUNE -- The year 1981 marked the appearance in the U.S. of the DeLorean DMC-12, a brand that ended up meaning more to fans of the movie Back to the Future than to car buyers. It's also the year the Datsun brand vanished in the U.S., replaced by Nissan.

Thirty-two years later Nissan isn't admitting to a DeLorean-size blunder, but the company has decided to resurrect the Datsun name. Nissan (NSANY) has chosen India to introduce the Datsun Go, a super-inexpensive hatchback. (It will cost about $7,000.) Fast-growing India has nevertheless progressed more slowly than China as an automotive market, as one manufacturer after another has tried to stimulate sales with bare-bones vehicles and low prices.

Tata, the Indian automaker, flopped badly with its Nano minicar that sold initially for $2,000. Its brand wasn't the problem. Indian consumers, it seemed, wanted more amenities and a bit more power than could be coaxed from a 38-cubic-inch engine. Nissan evidently worried that using its own name to sell such a cheap car might undercut its brand equity and hurt sales of more-expensive models in India and eventually elsewhere.

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Karl Brauer, an analyst for Kelley Blue Book, noted that Datsun might become a "launch" brand for Nissan in other developing countries, pointing out that "Nissan" might sound too foreign. "I think most people would agree there is a kind of natural happiness and friendliness to the word Datsun, sort of like 'Volkswagen' or 'Mini,'" he said.

"Marketers probably would look back and say the name change (to Nissan from Datsun) was one of the first big gambles that ushered in the "modern" era of brand management," said Bill Visnic, an analyst for Edmunds.com in an emailed comment. The automaker claimed it had prodigious research to justify the change, he said.

According to Reuters, Toyota (TM) also has toyed with a ultra-low-cost entry in India. One model was rejected as "too cheap to be called a Toyota." In 2010, Toyota introduced the Etios sedan, which starts at an equivalent of about $9,000. (Car manufacturers have also traditionally created brands to go upmarket, including Lexus and Infiniti.)

The Datsun Go will go on sale in India early next year, followed by sales in Russia, Indonesia, and South Africa. The four-door hatchback has a 1.2-liter engine and a five-speed manual transmission. Carlos Ghosn, chief executive officer of Nissan, has been pursuing a strategy of developing special low-cost, low-price vehicles that would be sold only in developing nations.

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Ghosn, also the chief executive of French automaker Renault, has promoted the Logan as another small, inexpensive car designed to entice consumers who've never owned a vehicle other than a scooter. Although Datsun might be an unfamiliar name in India, it's better than one that's never been used before, he said.

The Go, a nod to Nissan's history in Japan where the DAT-GO once was offered, will be built at the automaker's 400,000-vehicle-per-year factory in Chennai, in southern India. If the car is popular and other factors are favorable, Nissan may export the Go to Brazil, an executive said.

Debate rages endlessly among automotive marketing buffs whether Nissan blundered in the U.S. by dropping the well-accepted Datsun name. The debate probably won't be settled and matters less with time. A more critical question: Which automakers will break the code with consumers in emerging markets?

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