Cross Badging, Or Selling The Same Car With Cosmetic Changes Under Different Brand Names, Has Not Worked So Far In India

1645 words - 7 pages

In January 2012, Japanese auto major Nissan's Indian subsidiary Nissan Motor India sold 1,855 units of its compact car Micra. The same month French carmaker Renault launched its compact car Pulse in India. In February this year, Micra sales were down to 608 units, while Pulse sold 420 units. Turn to sedans. In August 2012, Nissan's sedan Sunny sold 2,757 units. In September that year Renault launched its sedan, Scala. By February this year Sunny sales had fallen to 1,191 units, while Scala sold 620 units. And guess what? Nissan and Renault are not even competitors. They have been strategic partners since 1999. Micra, Pulse, Sunny and Scala are all products of the Nissan-Renault alliance. Or ...view middle of the document...

It would have cost Renault India a lot more time and money to develop a compact car, or a sedan had it chosen not to cross badge Nissan models." Indeed, reports claim Nissan will soon fill a big gap in its product portfolio - it has no compact sports utility vehicle (SUV) - by crossbadging the highly successful Renault Duster. "Cross-badging offers a clear value proposition to the manufacturers and helps them expand the market," says Nitish Tipnis, Director, Marketing and Sales, Hover Automotive - Nissan's master franchisee in India. But does it? In India, both attempts so far have been failures. Cross-badging did not expand the market; on the contrary, it shrank. "The extent of failure is such that the combined volumes of Scala and Sunny's sales in February this year was 1,811 units, which is lower than the number Sunny alone sold - 2,757 units - before Scala was launched," says Kakade.
The same is true for the Nissan-Renault products. While some attribute this to the slowdown, which is squeezing the entire industry, a closer look at the numbers shows that the fall in sales of the original brand is far higher than the overall decline in the market. Why has cross-badging not worked? Examples from other countries have established that brand loyalty is critical to the success of cross-badging. But neither Nissan (nor Renault) nor Volkswagen have been around long enough in India to win the fierce brand loyalty that cross-badging banks upon. Worse, while a fully loaded Micra costs Rs 5.61 lakh today, a Pulse with similar features is priced at Rs 5.76 lakh. Few will see sense in paying more for essentially the same car simply to flaunt the Renault label. The same applies to the sedans, Scala and Sunny. Volkswagen did the opposite, pricing Skoda's Rapid lower than Vento. But that left Vento customers feeling short changed, apart from lowering the resale value of both cars. There may have been some gaps in communication too. "Crossbadging offers clear value to car manufacturers but what about the customers," says Abdul Majeed, Partner and Leader- Automotive Practice, PwC. "It is very important to communicate the value proposition to the consumer." Others claim the Indian market is not yet mature enough for this particular strategy. "Indian customers have not evolved to a level where they understand the nuances of cross-badging," says B.V.R. Subbu, automotive entrepreneur and former President, Hyundai Motor India Ltd. Not only is the Indian consumer primarily value driven, but the auto market is also highly competitive with well entrenched and aggressive players. There are no shortcuts like crossbadging to brand building, large investments are essential. "It is financially prudent and more effective to spend heavily on developing one brand," adds Subbu. He feels Renault and Nissan would have fared better if they had common dealerships and service centres and had sold their respective brands under the
one roof rather than cross-badging each other's...

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