BEIJING/MUMBAI (Reuters) -- Nissan Motor Co. takes the veil off the first car in its resurrected Datsun brand in New Delhi on Monday -- a sub-400,000-rupee ($6,700) hatchback that is part of a foray by the Japanese auto maker into cheap cars for emerging markets.
With the Datsun hatchback and other Datsun models to follow over the next three years -- one of which could be priced as low as $4,000 (240,000 rupees) if Nissan can meet its aggressive manufacturing cost objectives -- Nissan is treading ever so closer to the ultra-low-cost car market.
That market in India is now famously occupied by the Tata Nano, a barebones car that retails for between 150,000 and 220,000 rupees.
"We try to keep the price positioning for Datsun competitive, so that products are appealing" to the lower half of the auto market in India where Nissan has few products competing today, Nissan's program director for Datsun, Ashwani Gupta, told Reuters in an interview.
It is a move that has been generally resisted so far by other global auto giants, such as Toyota Motor Corp., out of concern a scruffy, ultra-cheap car model could tarnish their high-value brands.
Top Toyota executives, including current chairman Takeshi Uchiyamada, rejected a chief engineer's design for a low-cost emerging market car several years ago, saying it was too cheap to be called a Toyota, an engineering executive said.
The car has since undergone some design iterations and was finally launched in India in 2010 as the Toyota Etios sedan, which starts at 545,000 rupees. A hatchback version of the car, launched in 2011, starts at about 450,000 rupees.
Since Nissan plans to market Datsun cars in India through its existing Nissan-branded dealerships, Datsun could expose the Japanese auto maker to similar risks, though executives downplay the possibility.
They say use of a separate brand name should effectively shield Nissan's brand image. Datsun, which Nissan once used for its cars outside Japan, has a history dating back to the 1930s.
"We're serving different customers" with Datsun, said Tatjana Natarova, a Datsun spokeswoman. "That's why we came up with a different brand."
To make Datsun cars affordable, Nissan has been aiming to reduce manufacturing costs to $3,000 to $5,000 per vehicle. The first car is due for a launch in India early next year and Gupta said the company has partially achieved the cost goals.
Still, as price-competitive as that may be, it will face formidable competition from Maruti Suzuki and Hyundai Motor Co, which together control two-thirds of India's passenger car market, excluding SUVs and vans.
Maruti has about 1,200 retail stores in India, while Hyundai operates a network of more than 350 stores. Nissan, by contrast, has only about 100 dealers, though it says it plans to triple the number of its stores to 300 by March 2017.
Nissan said last year it would revive the Datsun name as a marquee for emerging markets, starting with India, Russia and Indonesia. Eventually, it wants to expand into Southeast Asia, Latin America, the Middle East and Africa.
To make the new name stick, Nissan does not plan to stop with a sub-400,000-rupee car. It plans to expand the Datsun brand's appeal by following its first car with a second model by the end of next year and a third vehicle by 2016.
Nissan is still trying to meet the goal of producing a Datsun car for as little as $3,000 per vehicle, said an executive speaking on condition of anonymity.
"If we met that, there would be a good possibility we could offer the car for $4,000 on the retail market," the executive said.
That is not as cheap as the Nano, but Nissan is not aiming to compete head-on with the Nano any way, the executive said.
By the year ending March 2017, Nissan wants to capture 10 percent of India's overall passenger vehicle market that includes sedans, SUVs and vans. Nissan had a market share of less than 1 percent as of May, data from the Society of Indian Automobile Manufacturers shows.
By then, Datsun aims to generate one third to a half of overall sales in India, which bought 2.7 million passenger vehicles in the year ended March 2013, Gupta said.
Local supply chain
To achieve low manufacturing costs, the Datsun product team designed and engineered cars so that "nearly all" the components needed to build them could be procured within India, Gupta said.
India has a relatively limited auto parts supply base so procuring almost all the necessary components locally poses a challenge. Gupta said though that Nissan aims to pull off the feat not only in India, but in Indonesia and Russia as well.
Gupta said Datsun cars would be stripped of features and functions that do not offer "value" to customers in markets they target to make cars affordable.
Nissan thus will likely avoid developing new technology.
Instead, it will use tried technology, in particular vehicle underpinnings, engines and transmissions, which are costly to develop. It is also likely to pare down expensive features such as power-windows, navigation systems, and extra safety airbags.