Ghosn’s 14 Million Cars: Not A Target, An Inevitability

(c) Bertel Schmitt

Carlos Ghosn, CEO of the Renault-Nissan Alliance, said yesterday in Paris that he expects the group to sell more than 14 million cars a year by 2022,  at the end of the Alliance’s mid-term plan that was set in motion yesterday. The 14 million are not the interesting part. The interesting part is why Ghosn thinks the number will come about, especially considering that predictions of an impending demise of the industry have become fashionable.

“14 million is not a target, it is not an objective,” Ghosn said, giving the impression that the number is more or less inevitable. “What I am telling you is what our assumptions are. Our forecast is that by the end of 2022, we should reach 14 million cars. We estimate that the total market by the end of 2022 will be between 108 and 110 million cars.”

This would be solidly up from a global volume of 95 million units in 2016, and Ghosn clearly doesn’t subscribe to the popular notion of peak car, and of Uber and self-driving pods disrupting the auto business. This year, the Alliance expects to produce and sell a total of 10.5 million units, and it might end the year as the world’s largest automaker.

“When you take a look at the total revenues from selling cars and the expected revenues of mobility services, even 6 years down the road it will be totally imbalanced,” Ghosn said.  “I don’t think that mobility services will represent a big portion of revenues, compared to selling cars, parts, accessories, servicing of cars etc.”

If Ghosn is right — and he usually is — then General Motors made a big mistake. GM struck its sails in Russia, Europe, and in growth markets like India and South East Asia, to focus on safe markets, and to invest in ride-hail company Lyft. Ghosn’s five-year plan assumes no growth from mature markets like the U.S., Europe, and Japan, and it expects growth from markets GM abandoned.

With Avtovaz, the Alliance has Russia’s largest carmaker. In India, Renault outsells all European and American OEMs. The Alliance’s Mitsubishi is very strong is South East Asia.

It also has become fashionable to predict the imminent electrification of the auto business. Renault and Nissan have been early pioneers of electric cars, and Ghosn likes to mention that when it comes to EVs, “the Alliance is not a leader in share of voice, but certainly in share of market.” There are some 1.4 million EVs on the world’s roads, and more than half a million of those have been made by Alliance partners.

For a definite leader of the EV space, Ghosn’s expectations of future EV sales are sobering. By 2022, Ghosn thinks the Alliance might do 30% of its business with EVs, and he is quick to mention that this again is not a goal, but an assumption. Ghosn believes that customers will have to be forced by governments to abandon the internal combustion engine, that EV growth will depend on pressure from above, and that it will happen mostly in mature markets.

Much to the surprise of many observers, the Alliance became the world’s largest automaker in the first half of 2017. It did so with the help of Mitsubishi Motors, which became a member of the partnership in 2016. With the addition of another Alliance member, the 14 million mark could be crossed rather quickly. Asked whether the doors are open to more partners, Ghosn answered: “Oh yeah, without any doubt. The logic of the Alliance is to have other members join. Do we need more? No. But if there is an opportunity, we will take it.”