ON A dusty sun-baked field, in a ceremony presided over by a Brahmin priest tossing water and rice, the Japanese car maker Nissan Motor made a bold step into the Indian auto market.
The traditional Hindu ritual this month, attended by a half-dozen sweating Japanese and European executives, blessed the site where Nissan will build its first passenger vehicle factory in India, a sprawling $1.1bn complex where rice paddies once sto
od. The plant, built jointly with its French partner Renault, an hour outside the southern city of Chennai, will turn out 400,000 cars a year when completed in two years.
Japan's Big Three – Toyota, Honda and Nissan – led the world in factory automation and eco-friendly technology, but until now they have been cautious about venturing far from the roads they know: the mature markets of North America and developing markets closest to home, particularly China and Thailand. Now, in a radical shift, Japan's big three are ploughing into exotic terrain, from Saharan Africa to the former Soviet Union to the scorching plains of southern India.
They are determined not to repeat the mistakes of a decade ago, when they were late to the party in China, and where they have since trailed rivals like Volkswagen and General Motors. They have been particularly quick to expand in India, a nation of 1.1 billion that is just beginning its automotive revolution, and that many call the world's next megamarket after China.
Speaking at a shareholders meeting on Wednesday in Yokohama, Nissan's chief executive, Carlos Ghosn, said surging prices for raw materials would force car companies to raise prices – but that the economic malaise afflicting the United States and Japan would make it harder to increase sales in the face of higher prices.
So places with rapidly escalating demand – like India, Brazil, Russia and China – will be more important than ever.
According to CSM Worldwide, the auto market research company, vehicle sales in developing regions are expected to rise by about 10 million units over the next six years, contributing 76 per cent of the industry's entire global growth.
In the last seven years, Nissan's vehicle sales in all developing nations have nearly tripled to one million units, out of the company's 3.7 million vehicle sales last year.
"It used to be that Honda relied on its US business, maybe too heavily," said Honda's president in India, Masahiro Takedagawa. "Nowadays, we are trying to spread the sources of profits more globally, beyond just one market."
Breaking into far-flung emerging markets comes with its own hazards, especially when the Japanese car maker's most lethal competitive weapon is world-leading quality. This is especially true as they build factories in places where local parts suppliers are accustomed to lower standards – and where even electricity is unreliable.
In India, for instance, Nissan faces challenges from ensuring timely delivery of parts via half-finished roads clogged with trucks and bullock carts, to teaching its new workers and local suppliers exacting Japanese precepts like kaizen, or "constant improvement".
But sales of cars and trucks are still expected to double in India to 3.92 million by 2012, according to a forecast by the market research group Global Insight. India's burgeoning middle class has embraced the automobile with such fervour that cars now clog the nation's crumbling roads and outdated infrastructure, vying for space with taxis, scooters, wandering cows and even an occasional elephant.
"We are not as good as Japan. Far from it," said Deb Mukherji, the chief executive in India of Caparo, the Indian unit of a British car parts maker. "But the Japanese hold our hand, work with us on the shop floor, help us develop."
The full article contains 626 words and appears in Scotland On Sunday newspaper.
