Is it Worth Investing in the Mitsubishi Brand? Some Alternative Scenarios For Nissan to Consider

Last week, Nissan announced that it will purchase a controlling interest in beleaguered Mitsubishi Motors, after Mitsubishi suffered a significant setback when caught cheating on emissions tests. 

'Nissan Chief Executive Carlos Ghosn said the two would now share and jointly develop technology, and could realize 'billions' in synergies by coordinating purchasing, plant utilization and cooperating in growth markets. (1)'

Mr. Ghosn also said, 'We are determined to preserve and nurture the Mitsubishi Motors brand. We will help this company address the challenges it faces, particularly in restoring consumer trust in its fuel economy performance.' 

Does it really make sense to 'preserve and nurture' the Mitsubishi brand? Is is just a matter of restoring trust in fuel economy? Or does the problem with the brand run much deeper? Does the newly formed alliance run the risk of squandering some of those 'billions' by investing in the Mitsubishi brand at all?

The fact is that Mitsubishi is a lackluster niche automotive brand  (FY15 global sales totaled around 1 million units) that has languished for years due to previous scandals and mismanagement. As a matter of fact, most analysts were sounding the death knell for Mitsubishi in the US market prior to the emission scandal. And even its purported strength in ASEAN is more than likely driven by the supply of low priced vehicles from its plants in Thailand and the Philippines, rather than real market demand. 

Source: Automotive News

So while Mr. Ghosn talks of brand value, his real motive is likely to give him a new opportunity to work his famous cost cutting magic to deliver shareholder value. 

And while the 'billions' in potential synergies make this deal attractive regardless of brand value, is there a way that this acquisition could help Nissan solve some of its own brand challenges? Could Mitsubishi play a completely different role in Nissan Motor Corporation's portfolio of brands?

A few thought starter scenarios:

1: A Jump Start for Datsun ?

Three years ago, Nissan re-launched the lower priced Datsun brand in India. Two years ago, it launched Datsun in Indonesia and South Africa. Sales have yet to meet expectations. By combining Mitsubishi and Datsun in these countries, could the existing Mitsubishi dealer body give Datsun a ready made distribution network? Could Mitsubishi's Kei Cars and inexpensive pickup trucks combined with Datsun's Go model create an 'instant' full line of low priced products to serve the market for which Datsun was created? Done well, a Datsun rebranding could help erase Mitsubishi's baggage while jump starting Datsun progress.

Datsun would be poised to fast track expansion not only in its current markets, but in other developing LatAm, Southeast Asia and African markets where Mitsubishi already has a presence. 

2: A New Eco Brand?

The Nissan-Renault alliance has been a pioneer in electric vehicles. But sales have ramped up slower than expected, and scale is the key to electric vehicle profitability. Given their small role in the larger Nissan and Renault portfolios, electric vehicles have not received the attention that they require from the sales and marketing organization to succeed. 

What if the Alliance was to launch an all-new, all-electric brand for the mass market? In this scenario, Mitsubishi's relatively small size can be turned into a valuable asset. Mitsubishi has fewer dealers who are very used to operating with limited product portfolios. This is the ideal situation for an all electric franchise. In addition, it plays to Mitsubishi's strengths in Japan as an eco-friendly fuel efficient brand. And by focusing all sales and marketing efforts on electric, Nissan Motor Corporation just might just be able to be the first manufacturer to deliver 1 million electric vehicles.

3: A Transformation Hot House?

Of course, the elephant in the room is that the car business is in the process of undergoing significant change. In as soon as 10 years, the business will likely look nothing like it does today. Car sharing, autonomous driving, new revenue streams will transform the business. Some pundits even suggest that as the industry transitions from a product to service oriented business, individual product brands will become irrelevant, much like aircraft brands are irrelevant to fliers. Instead, the differentiation will come purely from branded service offerings.

What if Mitsubishi became the Alliance's real time experiment for transformative business models? Could the Alliance pioneer a new service brand for which Mitsubishi plants become the exclusive supplier of vehicles used to test and fine tune new services and business models?  This would allow the Alliance the freedom to invest solely in developing and marketing the new service brand, rather than trying to build demand for Mirages or Pajeros.

While each of these scenarios come with their share of difficulties and risk, it's quite possible that the Nissan Alliance could achieve might greater ROI on it's investment in Mitsubishi by trying something new, than by trying to preserve and nurture the Mitsubishi brand.

(1) Source: Reuters

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