Nissan side-steps calamity

Nissan Australia is considering sourcing its Micra light-segment car from Indonesia, but not merely due to currency exchange rates or Japanese disasters. 

The problem is simply one of excess demand. Nissan cannot build the K13 generation of Micra (pictured) in the numbers required to satisfy the customers in four Asia/Pacific markets: Thailand, Japan, Australia and Indonesia.

Micra has been an enormous success for the company in this region. From the Thai launch, domestic demand for the new car ensured there'd be supply constraints for the next market on the launch schedule, Japan — followed by Australia and Indonesia. Eight months after the car's launch here Nissan Australia still can't obtain enough production capacity from Thailand to meet local demand.

"The success of March — [as Micra is] called in Thailand — put a lot of strain on the factory in Thailand," said Nissan Australia MD, Dan Thompson last week. "So the plan all along was actually to use Thailand as a production source for Indonesia — [but] they realised probably about three months after the launch of Thai domestic [March/Micra] that that wasn't going to be possible, so they are now producing Micra in Indonesia..."

If Thai demand were unexpectedly strong for the Micra, Japanese demand added to the problem, through a government incentive to buy smaller, eco-friendly cars. The retail incentive was due to expire not long after the Micra went on sale in Japan, forcing a run on the new Nissan.

That's why Nissan in Australia is currently engaged in talks with the Indonesian factory to supply the local market. The Indonesian plant is up and running, whereas proposed upgrades for the Thai plant will take time to implement. Sourcing the Micra for Australia from Indonesia will free up capacity in Thailand, where other Nissan products sold here are also built.

"It's frustrating but it's a good problem to have," Thompson said of the need to find ways of obtaining adequate supply for local demand. Micra has proved so popular around the world, it's also being built in India for European markets. Laying hands on enough Micra stock is a conundrum for Nissan Australia, but the hatchback isn't the only Nissan product in short supply here.

"We're still facing severe constraints out of Thailand," Thompson continued, "even for Navara."

Both the ancient D22 model Navara and most D40 Navara variants come to Australia from Thailand. As is the case for Honda, Mitsubishi and Toyota, cars built in Thailand for Australian consumption are cheaper to import, due to the free trade agreement between Australia and Thailand.

Both Nissan Australia and its parent company are tossing up different means of ending the shortages. As of a few months ago, the importer began sourcing Maxima from Japan, thus taking some further pressure off the Thai plant.

And as we reported recently, Nissan and Mitsubishi have entered into an agreement, whereby Mitsubishi will build the Navara for Nissan at another Thai plant. Whether that means that Nissan Australia will also source its D40 dual cab Navara and Pathfinder models from Mitsubishi remains unclear. Both the high-spec D40 variants are currently built at Nissan's Barcelona, Spain facility.

Thailand is not the only Nissan facility around the world having trouble keeping up with demand. The Dualis is built at the company's Sunderland plant in England and that plant is run off its figurative feet delivering sufficient numbers of the Qashqai — to use the European market name for Dualis.

"Qashqai in Europe just continues to amaze, so for us... we've never really known what we could do with Dualis," says Thompson, but Nissan Australia will continue to source the Dualis from Britain, as the Japanese specification is different.

While demand from other markets is leading to supply of Nissan product for Australia drying up, it's not all bad news for the importer. The disaster that knocked out automotive production facilities in the country's north had a relatively low impact on Nissan's own vehicle production facilities.

Only two of Nissan's plants were affected by the disaster. Those two plants, as Nissan's Head of Corporate Communications, Jeff Fisher, explained to motoring.com.au back in May, are the V6 engine line for 370Z and Murano, and the car assembly lines for GT-R and 370Z. It's been fortunate for the manufacturer that only the production lines for two low-volume sports models have been affected significantly by the natural disasters.

While most Japanese companies are probably revisiting their production logistics strategy right about now, Nissan is broadly sticking with the status quo. The company will not close down its Japanese manufacturing facilities for the sake of future production security or out of currency exchange rate concerns.

Thompson says that Nissan wants to retain about a million units of production in Japan each year, but with the strength of the yen currently — and calls for production to move offshore in the post-quake analysis — it's more and more likely that Japanese-built cars will be the high-margin models, such as Infiniti, GT-R and 370Z.

"The company has made it very clear the last year to two years — as the yen has strengthened and as we've had the earthquake and tsunami... We've been pretty firm that our plans aren't changing.

"We need to have at least a million units of production in Japan to keep that as the centre of excellence for production..."

The cars currently being built in Japan for Nissan Australia are the Maxima, as mentioned, the 370Z, the GT-R and the X-TRAIL — with LEAF and Infiniti models set to follow. Initial demand for the LEAF electric vehicle is expected to be very high too, until the company's American production facility comes on line.

Thailand is currently building the Tiida in addition to the Micra and Navara. Along with the British-built Dualis and the Spanish Navara/Pathfinder variants, this scale of production diversity represents an 'accidental' risk management strategy, seeding production plants all around the world to supply far-flung markets like Australia.

It is basically borne out of a corporate philosophy that is practically unique in the world, thanks in no small part to Nissan's alliance with French company Renault and cross-pollination from that alliance.

"It goes to the fundamental strength of Nissan," says Thompson, "being very different — albeit a Japanese company, but it's not a Japanese company.

"It's been managed and driven by a very diverse management team for the last 12 years — since [Carlos] Ghosn came into the organisation. So I think we have a very different management style, a very different management philosophy. We've been working for many years to put more flexibility into our supply chain and our sourcing footprint.

"Even over the last four months... as we know because of global demand, any time I raise the question to Japan about 'how do we get more Navaras?', it's instant reaction and it's 'okay, let's figure this out...'

"There's a real willingness, which isn't Japanese culture, because of the speed element. I mean, obviously the Japanese want to attack and deliver whatever they can, but there's just a different mindset, about nothing's impossible..."

If you're an Australian consumer, however, it might seem impossible to take delivery of a Micra or a Navara at the moment, but the company is still pumping through more cars than it did during the same period last year. Nissan Australia's sales figures are ahead of 2010's, according to VFACTS — over 1100 units ahead.

Imagine how those figures would look if the factories were able to work at 150 per cent of capacity.

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