There was a time when the Nissan brand had huge potentials in the Philippines, which was the reason behind the establishment of a modern car assembly complex in Sta. Rosa, Laguna in the 1990s by Nissan Motor Philippines Inc. (NMPI).
But the Asian financial crisis and Nissan’s plunging almost into oblivion in the late 1990s made things look bleak for the brand worldwide, including in the Philippines. If it were not for current Nissan Motor Company Limited (NML) president and Chief Executive Officer Carlos Ghosn, the Nissan brand would not have recovered to become a truly world class brand that is among the leaders in innovation.
Despite the recovery of the Nissan brand worldwide, things were not looking up in the Philippines from the time Nissan and Renault alliance was formed, because two separate companies were marketing the brand in the country. Today, Nissan is marketed in the country by Nissan Philippines Inc. (NPI), of which NML, Yulon Motor of Taiwan and Universal Motors Corporation (UMC) are stakeholders. Yulon is the controlling stakeholder in NMPI. NML owns 51 percent of NPI.
NPI president and Managing Director Antonio “Toti” Zara said Nissan’s being marketed by two companies, NMPI and UMC, in the Philippines prior to the formation of NPI did not make the brand grow in the country.
“As far as the market is concerned, they saw it as one Nissan, but in reality it was still separate. And there was a lot of inefficiencies driven by having two Nissan distributors [in the Philippines],” he said.
“There was no real building of the brand. That’s why Nissan [of Japan]decided to grow the business in the country. The Philippines is a critical market within Southeast Asia. I believe we will be growing faster than Thailand and Indonesia in terms of growth percentages,” Zara added, referring to the Philippine vehicle market.
Since he took over the helm of NPI in August last year, there has been positive developments for the brand, like the signing up of more dealers.
Zara said NPI signed up six new dealers and four more will be signed up soon. Only one new dealer will be located in Metro Manila.
Also in March this year, NPI sold about 1,000 units, which was the best for any month for the company in the past 10 years.
“I think we are gaining ground. I remember last year, we were number ten, I think, among the car brands. Then we moved up to number nine and number eight. In recent months, we are already number seven,” Zara said, citing the March sales figures.
“I think we’re creating the momentum. We’ve had a series of introductions and the X-Trail [compact SUV]was very well received. The Navara [pick-up] so far is doing very well. The confidence of the dealer network is at an all-time high,” he said.
NPI currently has 28 dealers of which 19 are outside of Metro Manila. Once the 10 new dealers will be established, the company will have a total of 38 dealers, of which 10 will be located in Metro Manila.
“In one day, we signed up six new dealers,” Zara said, adding that is still unheard of in the Philippine car industry.
“You know the dealers, they won’t sign up without seeing the growth prospects of the brand,” he said.
When it comes to the long-term growth of the Philippine automotive market, NPI sees growth because of improved incomes. Also, that growth will also be anchored on the expanding market outside of Metro Manila, which is the reason why nine of the 10 new dealers will be outside of the Philippine capital.
“The growth would happen in the north, south, in Visayas and Mindanao,” Zara said.
He said that in the advanced economies in Asia, vehicle sales in the capital cities no longer take up a big portion, citing Tokyo accounts for 25 percent of national sales and Seoul 30 percent. In cities that are more developed than Metro Manila but not at the level of Tokyo yet like Bangkok, accounted for 40 percent of national sales. On the other hand, 70 percent of Philippine vehicles sales are from Metro Manila.
“As the country develops and motorization kicks in, the growth will happen outside the capital city. It’s not that Metro Manila sales will go down because people will still replace their first car,” Zara added.
This means Metro Manila car sales will still remain high in terms of volume, but the areas outside of the metropolis will gobble up much of the increase in vehicles sales in the next few years.
In fact, the NPI president said he was surprised to see how the countryside is developing, because he was 12 years away from the country working abroad for other car brands.
He said many families in the rural areas are becoming better off because their children finish college and are able to work abroad or the urban areas, which results to a growing number of countryside households having two or three income earners. The rural households with overseas Filipino workers also earn dollars.
“These are the people who would really fuel motorization [outside of Metro Manila],” Zara said.
“What happens is a country experiences exponential growth in the [vehicle]industry when the per capita income is $3,000. Before $3,000, the [vehicle]industry grows slowly. When the per capita hits $3,000, you will see a spike [in vehicle sales]and we are at the point,” he said.
Zara explained the per capita gross domestic product of $3,000 is the “critical point” where the middle class starts buying brand new cars.
When he was working in Thailand, Zara said his maid, whose husband was one of the security guards of the village where he lived, drove a pick up and even parked her vehicle in one of the parking slots assigned to him by the subdivision.
And every car firm executive in the Philippines will always cite Thailand as the most successful model on how the government should support the car industry.
Based on the website of the Trade department of Thailand, its government extends the following incentives to car manufacturers and parts suppliers: a five-year 50-percent reduction of corporate income tax on net profit following the expiration of the corporate income tax holiday; 10-year double deduction of transportation, electricity and water supply costs; and deduction from net profit of 25-percent of investment in infrastructure installation and construction costs.
Thailand exported $1 billion worth of vehicles to the Philippines in 2012, according to a brochure on the Thailand car industry published by the country’s Board of Investments.
The same brochure showed Thailand produced 2.45 million vehicles in 2012.
How to develop ph car industry
Zara believes, however, that it is impossible for the Philippine car industry to go head-to-head against Thailand and even Indonesia’s vehicle industries.
He explained the success of the vehicle manufacturing industries of Thailand and Indonesia were not from producing a vast range of cars, because the Thais made their country the “pick-up manufacturer of the world” while Indonesia specialized on multi-purpose vehicles (MPVs).
“The government has good indications of what will come out in the road map. But I am not sure whether we are taking the right approach,” Zara said, referring to the car industry road map the Department of Trade and Industry is currently finalizing.
“If you look at other countries that developed its car industry, they protected certain segments of the industry. I’ll take the example of Thailand. At one point in time, government decided they want to be the pick-up manufacturer in the world. And then people said ‘why pick-ups, there are few pick-ups sold in the world, why not build cars.’ But then the Thailand government said there are too many players in the car segment, the sedan. Let’s just own this niche [pick-ups],” he explained.
Today, Thailand is the biggest pick-up manufacturer in the world outside of the United States, where the most preferred pick-ups are still full-sized. Today, Thailand boasts of producing the large numbers of mid-sized pick- ups like the Mitsubishi Strada, and the Ford Ranger, among others. About 40 percent to 50 percent of vehicles sold in Thailand are also pick-ups, according to Zara.
Indonesia with its 200 million population, for its part, specialized on MPVs or Asian utility vehicles like the earlier Toyota Tamaraws or the Kijang as it is known in that country. Zara said Indonesia was able to establish its manufacturing base for MPVs because of the special taxes imposed on completely-built up MPVs imported from other countries. Today, Thailand and Indonesia are eyeing specialization on economy or small cars.
“My concern on our roadmap is we are not creating our niche, and we’re trying competing head on with these giants within Southeast Asia. I’m afraid we’re too late to do that,” he added.
If there is one niche the Philippines can aspire for, Zara said it could be in passenger vans.
“Why don’t we develop vans, because the van has the potential in the Philippines. We need people movers. We need affordable replacements for the jeepneys. And then not many countries really build vans, because it’s a small segment. But maybe we can build vans and build it for the world. That’s where we have a chance to export vehicles,” he added.
He actually suggested that to the Board of Investments of the DTI. How come the agency did not take it seriously?
Zara’s vast knowledge on how the vehicle industries of Thailand and Indonesia were developed should no longer come as a surprise, because he is among the very few car firm executives in the Philippines who had stints abroad. There are also a few Filipinos currently working for foreign units of the popular car brands.
Prior to being tapped to head NPI in August 2014, Zara was managing director for International Sales at GM Motors Korea from 2008 to 2012. He was also vice president for Sales, Service and Marketing at GM Motors Southeast Asian from 2006 to 2008, president of GMJ National Sales Company, GM Motors Japan from 2000 to 2003, and director for Sales, Service and Marketing of PT GM Motors Indonesia form 1999 to 2000.
Despite being associated with GM in his foreign stints, he knows very well the vast potential of the Nissan brand in the Philippines, even describing the brand as being more global than the other Japanese or American automotive brands.
In fact, Nissan can no longer be described as a purely Japanese brand because it is 43.4-percent owned by Renault. Nissan, in turn, has a 15-percent interest in the French car firm. The “alliance,” as it is fondly called by both business and motoring journalists, has resulted to a marriage between Eastern and Western management approaches, which in turn has produced an environment where world-class thinking is fostered.
Zara said Eastern management is more process oriented, while the Western style is management by objective. But because he worked for both American and Japanese car firms, having started his career with Toyota’s Philippine unit, Zara knows first hand the difference of both management styles.
“In terms of management style, I have been exposed to eastern management and western management]. GM, an American company, it’s very western, management by objective. I also worked for Toyota, traditional classic eastern management, which is process management,” he said.
Zara added GM and Toyota cannot continue operating on a purely western and eastern management style, respectively, even if both are still locked in a constant battle on who is the top car maker in the world. He believes the real “winner” will be the car company that can race to the “middle” first to become a truly global company. The “middle” he is referring to is a global management style that has the best of western and eastern management approaches. Zara sees that in Nissan.
The NPI president said that when he first visited the NML headquarters in Yokohama in 2014, he realized the brand was no longer traditional Japanese.
“Maybe it’s because of the influence Carlos Ghosn has put into the company in the past 15 years. We are actually a more global company. We’re not that traditional Japanese. If we were traditional Japanese, you would not see someone like me sitting here [and]running the Philippines [operation of Nissan]. That proves we are a global company,” he said.
“So that really excited me about joining Nissan. We’re somewhere in the middle [when it comes to management style]. I’d like to carry on that style [here at NPI],” he added.
A BS Mechanical Engineering graduate from the Don Bosco Technical College in Mandaluyong City, Zara sees the Nissan brand moving in no other direction but forward in the Philippines.
With a world-class thinker at the helm of NPI, it looks like the Nissan brand in the Philippines may finally realize its huge potentials in the country.