September 5, 2011
Nissan Executive Vice President Andy Palmer speaks to the Global Media Center
Q1. We are going to look at some business sectors shortly, but can you tell us a bit behind the thinking of creating a Global Media Center and what you see it doing for the brand?
Thanks for inviting me to the Media Center, and it is clearly a terrific state of the art center that we are getting here, which I think – apart from helping us make messages – it’s also very much a symbol of our Mid-Term Plan of Power 88, and the power being one of the Brand Power or Sales Power. So, I think we need to talk about the Media Center in the context of brand power and how telling stories is so important to elevating the brand.
The Mid-Term Plan says we have to elevate, improve our brand. What does that really mean? That really means that we can charge a higher price, transaction price for our cars, and we can gain a higher volume. Something that maybe traditionally we thought was a trade-off - we need to be able to do both. Now, how do you do that practically?
One of things that you have to do is that you have to tell compelling stories about the company, about the employees, about the products and something that basically resonates, of course in our case, resonates towards innovation and excitement for everyone. So the Media Center is really a medium, a very compelling medium, that allows us to tell our stories in the way that we like to tell them, basically either internally or – very compellingly – externally.
Q2. Corporations and carmakers talk about raising the brand value, and there are many metrics out there for whether that’s being achieved or not. Looking at Power 88, where do you see this ultimately leading the brand?
We’ve all read the textbooks that give complicated equations about what brand is and how you improve brand, and what the levers are. I try to boil it down to something very, very simple. If you can charge the price for the car that is equivalent to the best guy in the marketplace, and you can achieve his level of volumes at the same time, transaction price times volume or transaction price times market share, that has to show that the brand is equal to the best in the market.
Today we have a deficit. Today it’s clear that either by volume in some sub-segments or by transaction price, there’s a deficit, and if we were to look at that deficit compared to the best of the best, that deficit is $6 billion. That’s $6 billion of additional profit that we could bring, if we could be the best of the best in every segment.
Now, that’s probably unrealistic, but at the top level of the company, as you look at the macro, if we can be amongst the best brands means that we can, generally speaking, close that revenue-parity gap during the term of the Mid-Term Plan by 2016. It’s worth a heck of a lot of money on that bottom line and that’s what we have got to do.
Now, knowing that we need to push volume and we need to push price together simultaneously, what are the kind of things that you need to do? Clearly your products need to be great, but also there needs to be a clear linkage between the product story and the way that you tell that story to the consumer so that you raise the appeal–not only of the product itself but also the appeal of the company and what you are buying into.
Let’s put it another way. We are great at monozukuri; I believe that the Japanese word is “kotozukuri”, the science or art of storytelling, and we need to bring that kotozukuri up to the level of monozukuri inside the company.
Q3. Certainly, Infiniti is a key element of that strategy. There are areas like China where there is huge growth potential and obviously sales potential. What’s the latest from that key market?
Infiniti is clearly one of the key parts of our Mid-Term Plan. It’s important because it’s an area of a market that is growing. I think luxury, more or less, represents about 10 percent of the global TIV (total-industry volume), but it represents about 35 percent of the total profit in the industry. So, clearly we want to be in that segment because it's an important segment to be in.
It’s also an opportunity for us to demonstrate our monozukuri talents; we can put our best technologies into Infiniti. Now, Infiniti is a 20-year old story, but most of that period of time has been United States-based. The question now is can we take Infiniti on a global level? Obviously, over the last couple of years, we’ve been starting to do that.
China is a good example. China is a white piece of paper. We can create the story, we can create the brand image, from the beginning. In 2009, we sold 5,000 cars more or less in China. In 2010, we sold 11,000 cars.
This year, I believe, in spite of the (Japan) earthquake we’ll sell over 20,000 cars, and I am already in dialogue with our Infiniti colleagues in China. For next year, I believe it’s going to be around 35,000 units. So the growth potential is very high. When I talk to some of our internal consultants, the likes of Jim Press, [who has] spent a lot of time in China, he honestly also believes that we are getting resonance there, we are getting people talking about the brand, and we are probably in a better place than certainly the Honda’s Acura and Toyota’s Lexus. So, I think we really have a good chance and that China should be one of the three pillars of the Infiniti brand.
Q4. For Infiniti in China or globally, is volume an issue or being able to make that many cars?
Volume is not an issue and we shouldn’t push volume. Volume should be a consequence of doing the job right. I’d much rather talk about turnover or overall profitability, in the case of luxury. But within there you have to sell a reasonable volume. Broadly speaking, we see 500,000 as a realistic number - all done well, all the consequence of treating the brand correctly.
Is there an issue with capacity? No, we have capacity and with the plans that we have, we can make those cars, of course chiefly in Tochigi, but also in other places around the world.
Q5. Looking ahead, we have the Frankfurt Motor Show later this month and Infiniti will certainly be there. What’s on tap?
I’m really excited about Frankfurt. We are going to be taking the FX into the middle of Germany, the home of luxury, against BMW, Mercedes and Audi. We’re going to have Sebastian Vettel on the stand, a German national, the world champion, and he is going to be presenting the Sebastian Vettel special FX. I think that is a story all by itself - last year’s world champion, probably this year’s world champion, a German national, in the middle of Germany, at the premier of the German show, basically talking about Infiniti and how he helped design his version of the FX. It’s a great story.
Q6. The Red Bull relationship began before this season. You were going in with the reigning constructors’ champion as well as the reigning driver and are looking pretty good for 2011. How far do you see this relationship going and what has Vettel meant for the brand?
Why did we go into Formula 1? When you look at most-watched things on TV, you normally come down to three types of events: You’ve got the Olympics, you’ve got the World Cup soccer, and you’ve got Formula 1. So in terms of reach, Formula 1 is one of the ways of getting in an awful lot of people during one season. Over 500 million people watch Formula 1. Now if you can get your brand in front of those fans, obviously you are elevating the unaided awareness of the brand.
The big problem that we had with Infiniti, particularly in emerging markets, is simply people didn’t know what Infiniti was. So Formula 1 was chosen as a way of getting people to see the Infiniti marque and start asking questions – ‘What’s this Infiniti?’
Obviously, the next point is to make the linkage between that and the great cars that we have, and we know that if we can get people to drive Infinitis, we have a very good chance of selling them. So Formula 1 is very good at that, it’s very interesting that the most visible brands in Formula 1 for this season – Red Bull, number one, Vodafone, number two, and either Total or Infiniti, number three.
As a car manufacturer – the most visible car manufacturer in Formula 1 – in our first season out there is great. Are we going to continue the relationship? Yes, certainly for next year – we signed up to a two-year deal, and we have options to consider that beyond there. But we also have to look at Formula 1 not as the joy of going racing, but simply as a marketing platform. We will continue to work with Formula 1, as long as we need to raise the unaided awareness of the brand.
Q7. For brand identification, certainly electric vehicles and Zero-Emission technology has been a key facet. If you could, we know what’s out there for first-generation vehicles, but what might be coming in the pipeline?
Yes, you draw a good parallel. Everyone clearly understands we want to be a leader in Zero Emissions. Obviously with the LEAF, I think, from this month or from next month we will become the largest seller of EVs ever, so we’ve made the point we’re the EV leader. Now, where do we go in EV terms?
We know that there are three more cars coming and we know that there are other technologies associated with EVs – discharging is the most obvious one. Right now, we have the ability to run your house from the battery of your car. Contactless charging is an interesting technology, which is coming. The program director is running a project on fast chargers and making fast chargers in house.
There are a lot of technologies and opportunities that we have in the zero-emissions space. What’s interesting is how do you link these back to the main portfolio. Historically, we’ve been very good at making nameplates. People know the GT-R, people know the Patrol, people know the Micra. How do you bring that back so it resonates with the brand?
We had the possibility of repeating our errors with Zero Emissions, so first of all you will always see the LEAF stated as the Nissan LEAF. We’ve also associated the technologies, particularly the battery technology, with the rest of the portfolio through the branding of Pure Drive. Pure Drive is about bringing the most advanced technology to make sure that we are in the leading group as far as good emissions, low CO2, is concerned. We want about 50 percent of our portfolio to be Pure Drive-badged. That makes the linkage that we champion zero emissions, and bringing back that technology into the main brand and linking it all together. When we talk about the LEAF, it’s clearly part of the Nissan portfolio, the Nissan brand.
Q8. We’ve seen that extended to LEAF NISMO RC, so even motorsports are an EV driver?
We have to be clear. We don’t go to motorsport because we like racing cars. We go to motorsport because it’s a proof point towards the brand. If the brand stands for excitement and innovation for everyone, then everything we do in function of that should be proof. Winning LMP2, the Le Mans series this year, is about demonstrating the durability of our engines and excitement of driving our cars; the innovation in the engine, the excitement of racing. The LEAF RC car, again, is proof of our ability to innovate.
Q9. Let’s talk about infrastructure. Nissan wants to be a leader in the EV space but it’s a little different to “if you build it, they will come”. You need partners to make sure that infrastructure will be available. How do you perceive the roll out of things like chargers and battery production?
That’s been the challenge of the Zero-Emission strategy, because you can’t just put a car out there and expect it to sell. The advantage of being the real leader at the vanguard of zero emissions is that you’re out there and you promote the brand. The downside is that you have to do all the hard work associated with the infrastructure. Clearly, three to four years ago we started the connections program. Certainly, I can say that in my career I’ve never worked with such a diverse group of individuals – with governments, utility companies, with infrastructure companies, with taxi companies in New York, as an example.
It’s certainly a different type of business. The onus is on us as a leader to try and put the infrastructure in place. During the summer vacation, I was involved with a big debate with Top Gear about there being no infrastructure in the United Kingdom. The point is that we’re the first point of contact when it comes to talking about Zero Emission. The fact that we’re criticized in Top Gear, for example, is good. They come to us, we engage them in debate, and we raise awareness of the infrastructure issue.
Now, there are other things we can do. We have a program right now putting in-house built quick chargers. What does that do? Well, that for example reduces the price point of a quick charger. Today, a quick charger is probably $40,000-$50,000. We’re doing it in-house and think we can get it down to $3,000-$4,000. It changes the paradigm completely. It introduces some competition outside, but also allows you to go to the governments and say: ‘We can donate or sell you some quick chargers but you have to be committed to having the parking space connecting to the electrical supply.’ It allows us to be a little bit more aggressive in our relationships with governments, utilities, telecommunication companies, etc.
Q10. Looking out from here, developing vehicles doesn’t happen in a vacuum. How do you perceive the impact of the strong yen or jitters from the economic situation?
Always the planning group’s job is to try and steer a course through all the vagaries that one sees. We try not to make knee-jerk reactions to the yen doing this or the European or American economies doing this. Of course, we’re trying to look at long-term trends, and based on long-term trends trying to anticipate what the correct manufacturing footprint is, where we see growth in markets, where are the future places we're building.
A good example: one of the big growing markets is Brazil. Our presence in Brazil is quite small – just a little over 1 percent. If we want to put our foot on the gas and accelerate in Brazil, we both need to look at the ability to manufacture in Brazil, and also our ability to raise the profile of the brand in Brazil. We’re working on both of those.
But we’re not going to react dramatically to where the yen is today. We have to be cognizant of the trend of the yen. Day by day, there are some of adjustments of what we can do, but we try to keep a fairly consistent view of we think is going to happen. I certainly hope the yen doesn’t stay as strong as it is today. It’s not what our long-term planning says but we have to be cognizant of the problem.
Q11. Energy prices our still pretty strong. Does that create a further catalyst for people to consider EVs?
Once you start to talk about gas being $80 a barrel, that’s what we consider the inflexion point of real interest. So we’re good if we stay with cheaper energy prices with the cars that we have, and if any prices increase, and inevitably they will increase, then it starts to play to our strengths as well with Pure Drive and Zero Emission. You only need a crisis of the nature of oil spillages that we’ve seen in the past, or sudden hikes in the cost of energy or oil, and that puts us on top of the agenda.