Car Chief Bets Big on Growth -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 16, 2017).

For Carlos Ghosn, the auto industry's once-dominant philosophy endures: Bigger is still better.

The chairman and chief executive of the Nissan-Renault-Mitsubishi alliance is pushing ambitious targets for the auto makers in an effort to leapfrog Silicon Valley and swipe market share, even as some of his biggest rivals look to scale back.

Mr. Ghosn said Friday he has set a goal of combined sales of 14 million vehicles for Nissan Motor Co., Renault SA and Mitsubishi Motors Corp. by 2022, a 40% increase compared with 2016. He is also planning 12 new electric cars, forays into robotaxi fleets and the debut of a fully autonomous car within six years.

"With the explosion of technology that is coming, it is going to make it very difficult for smaller players to follow," Mr. Ghosn said. "You're going to have a premium for the large car manufacturers because we are the only ones who are going to be able to invest in all the fields, all the products, all the markets, all the technology without making any shortcuts or without having any blind spot."

The largest car companies currently sell 10 million vehicles annually, but some, including General Motors Co., are cutting back car-selling operations. Those companies want to free up capital to compete with Alphabet Inc. and Apple Inc. in developing shared-vehicle fleets or services that could allow, say, a car to order your morning coffee or drive across country without any human intervention.

While the auto industry's little guys have always struggled to keep up, the big dogs have wrestled with their own demons. Volkswagen AG long pursued the industry's crown, only to face billions of dollars in penalties related to a U.S. regulatory scandal. It used software to cheat on diesel-emissions tests, a result of a grow-at-any-cost philosophy that claimed Detroit's auto giants a decade earlier.

Toyota Motor Co. previously had its own regulatory hiccups, which contributed to President Akio Toyoda calling a temporary timeout on expansion plans.

Even some of Mr. Ghosn's top executives have advocated for a more modest pace.

"We are going to have slow-and-steady growth," Nissan CEO Hiroto Saikawa recently said in an interview. Mr. Saikawa took over from Mr. Ghosn earlier this year. For the past five years, Nissan chased an ambitious goal set by Mr. Ghosn of achieving both an 8% share of global car sales and an 8% profit margin. It fell short on both.

Mr. Ghosn acknowledges the need for caution, but says his projections are based on expectations for growth in Brazil, Russia and other emerging markets, after recent turmoil when executives invested billions to capitalize on auto sales momentum that never materialized. In an interview Thursday, he reiterated that the company is well positioned in these countries, including ownership of a Russian auto maker.

The company also expects further growth in electric vehicles, and plans to launch 12 new EVs by 2022 on a common engineering platform. Mr. Ghosn says the payoff will ride on how governments around the world decide to incentivize sales of battery-powered cars and infrastructure development.

Nissan-Renault is also banking on China's auto market continuing to expand, recently inking an electric-vehicle partnership with local car company Dongfeng Motor Group. Even if volumes grow in China, foreign firms are having an increasingly difficult time competing against local companies, which receive government tax breaks and are waging a price war with cars and trucks that are more competitive.

GM had long pursued the size and scale that Mr. Ghosn champions, but this year Chief Executive Mary Barra dumped the auto maker's money-losing European operation and is retreating from India -- moves that followed the purchase of a Silicon Valley startup and a stake in ride-hailing firm Lyft Inc. Stung by a 2009 bankruptcy, Mrs. Barra's lieutenants now vow to only play where GM has assurance it can win.

"There were big things we couldn't pursue," GM President Dan Ammann said in an interview following the Europe sale. "I think we've led the way on breaking that industry behavior," he said, referring to the chase for market share.

Nissan-Renault, meanwhile, sees bigger volumes as the only way to fund projects aimed at meeting increasingly stringent regulatory demands and customer expectations that their vehicles operate like a smartphone: always connected, with a battery that quickly charges. The company already sold 500,000 electric Leafs, outpacing Tesla Inc., and its latest semiautonomous driving software goes on sale in the U.S. this fall.

Mr. Ghosn forecast a doubling of so-called synergies from the alliance by 2022, reaching EUR10 billion ($11.9 billion) by that time. More engines will be shared among group members, and vehicle platforms will be stretched further.

The company will launch a fully autonomous car by 2022, he said. Between now and then, the alliance will invest heavily in the technology needed to revolutionize car ownership, Mr. Ghosn said, and returns could begin flowing later in the decade.

--Mike Colias contributed to this article.

Corrections & Amplifications Nissan-Renault expects to introduce a dozen electric cars off a common engineering platform by 2022. An earlier version of this article incorrectly spelled the company as Nissan-Renualt. (Sept. 15, 2017)

Write to John D. Stoll at john.stoll@wsj.com

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September 16, 2017 02:47 ET (06:47 GMT)