Nissan India hit by change in assembling units' definition

The effects of adverse macro economic environment are likely to impact Japanese car major Nissan's ambitious 9 product rollout plan in India.
After a devastating tsunami hit its operations in Japan, the company is concerned about a change in definition of completely knocked down units (CKD) by the Indian Finance Ministry and import duties levied on them.

In the Budget for 2011-12, finance minister Pranab Mukherjee​ had redefined the meaning of completely knocked down (CKD) units, ostensibly to encourage local production of automobiles, which may alter the rate of customs duty on different imported parts.

“A definition for ‘CKD unit’ of a vehicle, including two-wheelers, eligible for concessional import duty is being inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or chassis where any of such parts or sub-assemblies is installed,” the Budget document read.

The Society of Indian Automobile Manufacturers had objected the new definition for completely knocked down (CKD) units of vehicles introduced in the Budget for 2011-12 will significantly increase the cost for high-end players and also hamper the introduction of new products.

NDTV learns that the company's nine product rollout plan by the end of 2012 is likely to be substantially delayed by over a year and half.

Sources say of the nine products, four were to be assembled locally using completely knocked down units . The cars were the Teana sedan and SUVs X-Trail, Qashqai and Murano.

Unless the vehicles also use knocked down engines, the new regulations see duty hike up from 10 to 30 per cent making these cars too expensive.

This has compelled the company to reconsider the feasibility of launching these products for the Indian market.

While the company has already started the imports of semi-knocked down units of the Teana sedan, it has still not finalised the assembly of X-Trail, Qashqai and Murano.


Even the volumes oriented sub-Micra small car to be priced between Rs. 2 and 4 lakh has also been delayed till 2013-14.

Nissan management agrees the change in duty structure has made them rethink their plans but refused to get into timelines of specific launches.

Kiminobu Tokuyama, CEO & MD of Nissan India said, "We have a very aggressive product line up for India."

But the numbers don't point towards a good show by the company so far. The Nissan Micra has sold merely 18,000 units in 10 months since its launch in the domestic market. On the other hand, Suzuki Swift, Hyundai i20 or Ford Figo have recorded sales 3-4 times over the Micra numbers during the same period.

Hormazd Sorabjee, Editor of Autocar India, "Distribution is a lifeline for any company. There is a logic in outsourcing it to experts but the performance has not worked so far. Numbers are just too small for what this car is capable of delivering."

On a brighter note, the company's exports from India remain robust and it has already shipped over 1 lakh Micras. With the small entry sedan SUNNY coming next from the company by Diwali and a co-branded Innova like MPV from its joint venture with Ashok Leyland just six months away, Nissan India hopes to turn things around quickly.