TSUGI, Japan—It is the car that baby boomers may remember as much for its compact chic as for its slogan ("Datsun, We Are Driven!"). Now, a new version of this storied brand may get more attention for something else: its price tag.
In a bold move into the auto industry's fastest-growing category—emerging-market countries—Nissan Motor Co. is planning a revival to this Beatles-era star that might surprise its fans. According to interviews with Nissan's CEO, Carlos Ghosn, and other company executives, the rebooted car will appear in these countries as bare-boned as any rival has tried. And Nissan is hoping to set new lows for pricing for a global auto maker, offering the cheapest Datsun model for about $3,000 to $5,000. The lowest price is nearly a third the price of its most inexpensive car, the $8,000 Tsuru compact sold in Mexico. In revealing new details to The Wall Street Journal about the tightly controlled project, Mr. Ghosn said the company was committed to offering six Datsun vehicles, due out beginning in 2014, at a price range lower than all but a handful of smaller car makers in China and India specializing in mini autos.
He portrayed the relaunch as much as a life's mission as a business strategy, with the goal of providing poorer populations a greater chance at car ownership. No major car company has yet figured out how to penetrate profitably the lowest price segment in emerging markets, even though these countries already make up nearly half of all global vehicle sales.
But both the overall strategy and selection of Datsun to lead the cut-rate charge has already faced some opposition within the company and is likely to cause concern among some analysts and car buffs. In its heyday, Datsun was a much-beloved brand, an economy car that was nonetheless prized for classy designs and innovative touches. But to have a shot at keeping the price at $3,000 for the lowest-priced model—which even Nissan officials concede will be a hard to pull off—the company will have to jettison features that have long been standard in the U.S. but not in developing markets, from automatic transmissions to a full supply of air bags.
Inside the company, some executives are worried the campaign diverts scarce resources needed to bolster established products in established markets. Nissan hasn't disclosed any figures, but analysts estimate it can easily cost $1 billion to build a new car. And while doubters among industry analysts are few so far, the company's Japanese rivals aren't convinced sufficient demand exists for such vehicles in the developing world.
"It's a big mistake to think you can introduce a cheap car in emerging markets and be successful," said Yukitoshi Funo, the executive vice president at Toyota Motor Corp. in charge of developing markets, where the auto maker has bet heavily on subcompacts and pickup-truck derivatives in the $8,000-$10,000 range. "People want a car they and their families can be proud of."
That Datsun is part of any Nissan power play, especially one this large, is an ironic twist for a company whose very decision to extinguish the car brand in the early 1980s was heaped in controversy. The nameplate was still popular at the time—it was the second-biggest selling foreign brand in the U.S. in 1981, with 580,000 cars sold—but Japan-based executives decided that year to stop using Datsun and replace it with Nissan to unify the corporate identity. The move, which caused widespread confusion among dealerships and buyers, contributed to Nissan's decline at the time and is still considered one of the worst marketing decisions in automotive history.
Now, the 58-year-old Mr. Ghosn, who came to Nissan 13 years ago to rescue it from the brink of bankruptcy, has decided to stake his reputation on this very brand. Born in Brazil and raised in Lebanon, he is the only head of a major car maker raised in the developing world, a fact that he says has deeply influenced the legacy he wants to leave at Nissan. He himself didn't own a car until he was 18, and in many underdeveloped countries, car ownership at any age remains more of a dream than a reality. In India, only 38 people out of 1,000 owned a car in 2010, compared with 808 people per 1,000 in the U.S., according to one study.
Of all brands, Mr. Ghosn is hoping that dusting off one of the industry's most recognized nameplates will generate excitement among buyers.
Countering his competitors' criticisms, he promised to roll out a car that will be "modern and fresh," because buyers in emerging markets want an automobile "that makes them feel good and is in their budget." He describes the new Datsun as one of the company's main "accelerators of growth," a key weapon in a plan to lift global market share in units to 8% by 2016, up from 6%.
To do that, the car maker plans to boost sales in emerging economies, which it expects to account for 60% of all auto industry sales in five years, up from 43% today. Mr. Ghosn claims that with enough first-time buyers, Datsun could capture one-third to one-half of total car sales in these countries.
Ralf Kalmbach, an automotive consultant with Roland Berger in Munich, calls its an ambitious but necessary move for the industry's big players. Indeed, Volkswagen AG officials have recently confirmed the company is looking into options to enter the low-cost segment but that no decision has been made. "There is no way around this entry-level segment for global auto makers," said Mr. Kalmbach. "It's growing too fast."
But even some corporate insiders at Nissan say the company's goals won't be easy—at least in a way that makes a profit. Outside of specialty vehicles—like the minicars made by Japan's Suzuki Motor Corp.in India—other global auto makers have steered away from the very low end of emerging markets. It remains the preserve of sub-$5,000 cars with razor-thin profit margins such as the Chinese-made Chery QQ, Suzuki Motor's Indian-market Maruti 800 and Tata Motors'Nano. To compete, Nissan must develop a full line of brand new vehicles, which it says it can do by 2014 by using simplified designs and an existing inventory of parts, and streamlining its usual approval and testing processes.
What is more, in the quest to make a profit despite charging rock-bottom prices, Nissan officials say they will have to take a bare-bones approach to comfort and safety, tailoring to societies less coddled than developed markets. For example, the cars will only offer manual transmissions and their exhaust systems will be noisier and vibrate more, much as they did before the addition of silencers and stabilizers, according to people familiar with Nissan's plans. Datsun's team is also peeling back the now-typical multilayered approach to safety for markets that care less about it than the U.S. "If an accelerator pedal sticks, they tend to overlook it rather than obsess," says Datsun team senior adviser Tokuichiro Hosaka, referring to emerging-market buyers.
For that reason—and because Nissan has no interest in cannibalizing its existing sales—the company says Datsun cars won't be sold in the U.S. or other industrialized nations, at least not initially. In those markets, regulatory and safety issues alone would virtually eliminate the company's super low-pricing strategy. "If you go to the U.S., it's not going to end up being $3,000," Mr. Ghosn said.
But reviving Datsun as a cut-rate incarnation anywhere in the world has prompted worries that the strategy will tarnish the reputation of a spunky nameplate that charmed a generation of first-time American buyers from the early 1960s to the mid-1980s looking for an economic and fuel-efficient option. While most of the sedans were boxy, some Datsun models offered sporty, technological innovations, including the 240Z, a coupe which debuted in 1969 with a fully independent suspension. The Fairlady 1500, which went on sale in the U.S. in 1962, came loaded with so much standard equipment that Road & Track wrote: "We have never seen a car that comes with so many extras at no additional charge."
Among those with misgivings: Yutaka "Mr. K" Katayama, a former Nissan executive who saw the first mass-produced Datsun roll off the line as a new hire in the spring of 1935, and was widely credited with making Datsun a household name in the U.S. "When the Datsun name disappeared, I was very sad—it is good to hear its coming back," the 103-year-old Mr. Katayama said, sitting in an office in a residential neighborhood of Tokyo, surrounded by a lifetime of automotive memorabilia, including a U.S. Route 101 sign. "But it'll be a shame if they're cheap cars. I had really hoped they'd make a more polished car," he said.
Other critics point to a similarly bold campaign by Mr. Ghosn—the pioneering battery-powered Leaf. Despite great fanfare as the car was rolled out, the Leaf has stalled out over the past year, with sales plunging to half the levels of last year in the U.S., and well below the volume of rival offerings from General Motors Co. and Toyota. "Mr. Ghosn has already made one big mistake with the Leaf, and he may be making another blunder with his approach to Datsun," said Hideo Hohgi, a professor at Waseda University's business school and former No. 2 at Nissan North America in the 1990s. Nissan officials have blamed the Leaf's woes on a shortage of recharging stations and higher-than-expected pricing caused by a stronger Japanese yen.
The genesis of Datsun's rebirth as an emerging-market brand came after India's top car maker, Tata Motors, floated plans in the mid-2000s to build a no-frills car for under $3,000. Nissan officials say the move stunned Mr. Ghosn, who had been told a full-fledged car couldn't be built for less than double that amount. Seeing the Nano as a wake-up call, he turned to his internal brain trust, a group known as the Nissan Exploratory Team, to find a way to build a better cheap car. The group kicked off a secret project called "The $3,000 Car" in 2007 and choose India to begin accumulating data for a detailed analysis of what car buyers wanted most—and what they could do without—to limit costs. Two years later, Tata introduced Nano to disappointing sales, blaming a flawed marketing campaign.
To try to compete on that level, Nissan has pared back on the latest safety technology and redundant quality checks. "You make a car as simple as you can and you're going to wind up with an $8,000 car from the costs of safety, powertrain efficiency, fuel efficiency and structural data for the platform," said François Bancon, 60, Nissan's general manager of product strategy and a member of the exploratory group. "We had to change the recipe, because the same recipe gives you the same dishes plus or minus some details. The notion of safety? Believe me, they are very flexible about this," he said.
Some exploratory group members spent stints of up to four months immersing themselves in India, sharing meals with focus-group participants and conducting repeated home visits to learn about their driving habits. One result: few Indians desired side or rear air bags hidden in the body panels, but most wanted a prominent bonnet out front as a perceived crash buffer in case of a head-on accident.
Today, the Datsun project has a core team of 15 full-time members—including a former dishwasher marketer at Hitachi Ltd. and a septuagenarian chief engineer lured out of retirement—who work with 250 other Nissan employees not exclusively devoted to Datsun. Leading Team Datsun is Vincent Cobee, a sharp-elbowed younger executive Mr. Ghosn put in charge after he successfully led the relaunch of one of the company's subcompacts. A Harvard Business School graduate with years of experience in the auto industry, the 44-year-old Mr. Cobee stands out even in Nissan's heterogeneous culture. Insiders say he has left mouths agape by routinely challenging higher-ranked executives at internal meetings, but he says he is unapologetic. "There is a tacit recognition that you don't do some things without some level of friction," said Mr. Cobee.
Neither Mr. Cobee nor other Nissan executives would discuss most features of the new Datsun. But according to a sketch viewed by the Journal, the reincarnated car will have its familiar hexagonal-shaped front end and honeycomb grille with a blue Datsun badge. Other features may not be as glamorous. As it looks for shortcuts, the company is considering replacing data-intensive and layered quality and safety checks with simplified final reviews based on hands-on inspections. As part of that effort, Nissan rehired a veteran engineer, the 70-year-old Mr. Hosaka, 11 years after he retired from heading Nissan's March/Micra small car development program in the 1980s and 1990s. His job: helping Datsun engineers rediscover how cars can be sped to market based on a simpler era, when blueprints were sketched out by hand.
"In cars made for the U.S. market, these days there's a huge mountain of regulatory and product liability paperwork," Mr. Hosaka said. "But that's not necessary for developing markets, where they are looking at the bigger picture."