Renault-Nissan sees bright future in Russia as it relaunches Datsun

Carlos Ghosn speaks on a screen as the new Datsun on-DO sedan is displayed during its Russian presentation in Moscow.

Photo credit: REUTERS/Artur Bainozarov
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MOSCOW (Reuters) -- Renault-Nissan CEO Carlos Ghosn sees great potential in Russia despite a slowdown in car sales in the country and the crisis over Russia's annexation of Ukraine's Crimea region.

Ghosn said the geopolitical situation is "bumpy" but is "not going to last."

"We have no hesitation about the potential for the Russian market, he said. "At a certain moment it will be behind you. Our strategy doesn't take into consideration short-term bumps but has to take into consideration trends and long-term potential."

Ghosn was speaking to reporters after unveiling the on-Do sedan, which is being launched in Russia by Nissan's revived Datsun brand.

The automaker's supply chain has not been disrupted by the Western sanctions imposed on some Russian individuals over Russia's annexation of Ukraine's Crimea region, he said.

Nissan retired the Datsun brand in 1981 but announced last year that it would relaunch the small car in emerging markets, targeting Indonesia, India, Russia and South Africa. It is partly seeking to lure young first-time buyers away from the used-car market.

Russia has a growing middle class with disposable income, low car density and an aging fleet on the road -- all factors that should support future sales. However, car sales have faltered as economic growth has slowed, causing people to put off large purchases.

Car sales fell 5 percent in 2013, according to lobby group AEB, which is forecasting another weak year because of the fragile economy.

Ghosn said he took a longer-term view. "I'm bullish on the market, I recognize the fact the market declined last year and will probably decline this year, but when we invest, we engage not for this year but five, 10, 20 years down the road," he said.

Datsun will benefit from the weaker ruble as it has localized production at AvtoVAZ's Togliatti plant and is using local supplies as much as possible, he said.

Renault and Nissan have struck a deal to take control of AvtoVAZ, which owns Russia's top-selling brand, Lada, by mid-year.

"The weakness of the currency is an advantage for local brands," Ghosn said. "Foreign brands import a lot of cars. So when the ruble weakens, all those with high euro or dollar content are disadvantaged."

The ruble has dropped 5 percent this year as investors price in the risks related to Russia's annexation of Crimea and the economic retaliation from the West. A falling ruble reduces consumers' purchasing power and makes it more expensive for automakers to buy parts from abroad.

Ghosn said that the Renault-Nissan-AvtoVAZ alliance aims to take a 40 percent market share in the Russian market, although he did not give a time frame. Renault, Nissan and AvtoVAZ currently have a combined share of 32 percent, according to figures from the AEB.

The four-door on-DO was styled in Japan and engineered specifically for Russia, Nissan said in a statement.  It is powered by an 87-hp, 1.6-liter gasoline engine and will be built in Togliatti.

The on-Do will retail in Russia at under 400,000 rubles ($11,300).

Automotive News Europe contributed to this report

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