Carlos Ghosn of Renault Nissan on Winning in Today’s Global Automotive Market

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Carlos Ghosn of Renault Nissan on Winning in Today’s Global Automotive Market

January 09, 2012
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    In This Video
    Carlos Ghosn

    At a Glance

    Year Born: 1954


    1974, École Polytechnique

    1978, École des Mines de Paris

    Career Highlights

    2009–present, chairman, CEO, and president (since 2005) of Renault

    2008–present, chairman, CEO (since 2001), and president (since 2000) of Nissan Motor

    1999–2001, chief operating officer, Nissan Motor

    1996–1999, executive vice president at Renault with responsibilities for the company’s Mercosur activities and multiple functions, including research, manufacturing, powertrain operations, and purchasing

    1989–1996, chairman and CEO, Michelin North America

    1978–1989, various positions at Michelin

    Outside Activities

    Member, International Advisory Council of Tsinghua University, Beijing, China

    Member, International Advisory Council for American University of Beirut, Lebanon

    Member, Strategic Council, Saint Joseph University, Beirut, Lebanon


    Established carmakers find themselves facing one of the most dynamic and challenging competitive backdrops in recent memory. Strong growth in global unit sales over the next several years will provide a robust tail wind for the industry. But the sources of that growth are changing dramatically, with the historically key markets of Europe, Japan, and North America ceding ground to Brazil, Russia, India, and, especially, China. As a result, carmakers will be forced to expand their regional focus and footprint considerably. Product demand will change in concert, requiring OEMs to extend and customize their product lines to meet the tastes and needs of this new, more diversified customer base. In addition, established players will have to ward off growing competition from emerging-market-based manufacturers and contend with persistent general downward pressure on prices, especially in established markets.

    Success in this climate will demand both aggressive moves and a deft touch. Carlos Ghosn, chairman and CEO of Renault Nissan, relishes the challenge. His willingness to tackle major transformations—evidenced most dramatically by his resurrection of Nissan in the late 1990s—is legendary, as is his ability to make them work. Ghosn continues to think in bold strokes—evident, for example, in his major investments to position Renault and Nissan at the forefront of the fledgling electric-car market. He is, in short, in it for the long haul with both of his charges, and he is playing to win.

    Xavier Mosquet, a senior partner and managing director in the Detroit office of The Boston Consulting Group and coleader of the firm’s Automotive practice, recently sat down with Mr. Ghosn to discuss a range of industry-related topics, including the prospects for electric cars, industry consolidation, how Renault and Nissan are positioned in China and India, and the leadership challenges of pulling companies through hard times. Edited excerpts from the interview, which was conducted in the fall of 2011, follow.

    Carlos, you’re one of the auto industry’s most visible champions of electric cars. Given where the market stands today, how do you see it evolving over the next ten years?

    I’m very optimistic about the prospects for electric cars on multiple levels: macro, technological, and product. Yes, there are some people who say that the cars’ range isn’t that great yet and that there isn’t enough charging infrastructure. But we’re at the beginning. The auto industry will sell approximately 75 million cars this year. Of those, probably 50,000 or fewer will be electric vehicles, which is a tiny percentage.

    So we’re truly just starting. Having said that, I’m very encouraged by what I’ve seen so far. And I stick by my forecast that electric cars will represent 10 percent of the global market in 2020. Why? Because the challenges that society is facing that make electric cars attractive—including concerns over oil independence, high oil prices, carbon emissions, and global warning—are not solved. They’re far from solved. On top of that, electric cars offer drivers a completely different driving experience from that of a combustion engine vehicle. For these reasons, I’m very optimistic about the future of electric vehicles.

    What are you learning from customers who have bought the Nissan Leaf, and is it consistent with your expectations?

    We know a lot about our customers and are learning all the time. We know, for example, that 55 percent of the people driving the Leaf are male; that the average owner’s annual income is $120,000; that owners drive the car an average of 30 miles a day; and that when they charge the battery, they charge it for about two hours.

    Now, I think, is too early to say whether what we’re seeing today is representative of what’s coming. In 2012, we’re going to be selling tens of thousands of Leafs all over the world, not only in the United States, Japan, and Europe. And that’s going to be followed by hundreds of thousands of Leafs sold going forward. As this growth occurs, we’ll see how people are using the car and how satisfied they are with it. So far, I can say that what we’re seeing is at the higher end of our expectations.

    Are you planning to manufacture the Leaf in the U.S.?

    Yes. We have a plant coming on board in Tennessee at the end of 2012 that will have a 150,000-car capacity. And we have a plan for batteries corresponding to that capacity. So in 2013, the Leaf will be U.S. made and U.S. based.

    Let’s turn to the auto industry as a whole. China, now the industry’s largest market in terms of sales volume, is expected to continue to grow rapidly. How are Renault and Nissan positioned for success there?

    Renault is currently selling a small quantity of cars in China—mainly exports from South Korea, where Renault has a base. This is per our midterm growth plan for Renault, which carries us to 2016. So for Renault, a larger China presence is coming. For Nissan in China, there is already a full-fledged offensive. Nissan, today, is the leading Japanese brand in China by far, and China is Nissan’s biggest market, ahead of the United States. And we continue to build our presence, having announced a more than $5 billion investment to raise our annual production capacity in the country from 1.2 million cars to 2 million. Ultimately, we are aiming for a 10 percent market share in China.

    What do you think will be the biggest challenges for Renault in terms of gaining share in China?

    The main challenge for Renault is that it’s making its push later than Nissan. That reflects strategic decisions we made about how we would divide and sequence our coverage of the BRICs. We had decided that Nissan would cover China first while Renault took care of Russia, Brazil, and India. Now, Renault is coming to China, and Nissan is going to Russia and India. What we’re trying to do with this approach is divide the tasks and make sure the Renault-Nissan Alliance has a good presence everywhere. 

    I think Renault is going to move fast in China. It’s going to be able to rely on Nissan’s suppliers, because a lot of the platforms and parts are common. Renault will also be able to leverage Nissan’s considerable knowledge of the market. And while Renault will have to build an engineering center, Nissan already has a bunch of engineers in China, and some of them may end up moving to Renault or supporting Renault’s development. So Renault has some key advantages in China by virtue of its relationship with Nissan.

    Do you think a French brand has a specific role to play in China?

    Yes, I do. The Chinese look carefully at product and service quality and are curious. They also like the diversity of the French offer and are very familiar with French brands—particularly in the luxury area, which is booming in China—because there are many French offerings in the country. So, yes, I think that being a French company should be a plus for Renault in China.

    The Alliance’s initial foray into India ran into some challenges. Can you comment on what happened and how you view the situation today? 

    Renault moved first for us in India, which is a very sophisticated and competitive market. And Renault had some difficulties at the beginning. But we learned a lot from that experience and now have a completely different approach. We are building one plant in Chennai for the Alliance, using common platforms for Renault and Nissan, and we are using a common distribution network. I think that our current approach is the way to go in India and that we’re now in a good position. Our progress there this year—particularly Nissan’s progress—has been remarkable. And Renault is set to launch a lot of products there next year.

    Ultimately, I’m optimistic that we’re going to make a substantial contribution to the development of the Indian market. And remember: India is still very small today, but it has huge potential for the future.

    Looking forward, do you expect an explosion of the number of OEMs globally or do you see further consolidation? 

    Frankly, I don’t know. There are two forces pulling in opposite directions. The number of established global developed-country-based car manufacturers has been shrinking and will continue to shrink. No question. On the other side, you’re going to have new, emerging-markets-based players. There is no doubt in my mind, for example, that you’re going to see at least one global Chinese maker and one global Indian maker, though it’s unclear which those are going to be. There are many candidates, and these players will be striving to compete and be successful globally—not just in their home markets.

    Do you think a Chinese or Indian OEM will have a chance in mature markets without making a significant acquisition?

    I think acquisitions will certainly play a part. We’re seeing it already. Volvo has been acquired by a Chinese maker; Jaguar has been acquired by an Indian maker. And we’re going to see more of this—in pieces of operations, entire operations, and brands. I don’t think an acquisition will necessarily be a mandatory ingredient for success. But in many cases, it will be a logical decision for an emerging-market-based OEM to take a piece of an existing business that its current owner can no longer make profitable and to use that piece to strengthen its global presence.

    You’ve put a premium, at both Renault and Nissan, on diversity in hiring. Do you think this is a source of long-term competitive advantage?

    Yes, I do, and I think it will become an even more important source of advantage for us in the future. It has certainly already helped us at Nissan in particular. Some people have wondered why Nissan recovered more quickly than other Japanese carmakers after the tsunami, since we were all hit roughly equally hard. Part of the reason, I’m certain, is that we’re a seamless organization in Japan and around the world. Our people working in Tokyo, for example, are not just Japanese but also British, American, Spanish, and so forth. The same holds for our offices in New York, Paris, and elsewhere. We’re a truly globally diversified company. And I’m convinced that this cultural diversity allows us much better communication and reaction time than we would have otherwise.

    You have led your organizations through some pretty trying times. What are the key things a leader needs to do to rally his people behind tough decisions?

    The first thing is to make your case for why the company has to do what it’s doing. You should recognize and accept that people may be reluctant to buy into it, at first, and you should work to understand the reasons why. And you should be empathetic and show that you are. But ultimately, you need to make it clear to people that in order to fix the problem, the company needs to act.

    You should also let people know that the company will act in a way that does not break anything that doesn’t need to be broken. In 1999, I broke a lot of rules in Japan. But I didn’t break more than I needed to. And I was very clear about what we were doing and why. I told people, for example, that I understood and had a lot of respect for the Japanese model but that it wasn’t working for Nissan and we needed to do something different. I told them the same about the keiretsu and Japan’s seniority rule. I understood and respected them, but they weren’t working for us.

    Once your people understand the problems and what you plan to do, you have to tell them that you need them on board. When people see that you have a clear vision and priorities and are engaged and motivated, and if they think you have a chance to be successful, they usually follow.

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