Does Nissan risk losing business in 'Datsun' move?

Junko Kimura | Bloomberg | Getty Images

Nissan's move to drop its brand name in the cheaper car segment is garnering mixed reaction from industry watchers who say Japan's third largest carmaker could lose potential buyers with the unfamiliar 'Datsun' label.

Nissan announced Monday the revival of the Datsun brand in India, a market where the brand has never sold before and according to Graham Hitchmough, regional director ASEAN at brand agency The Brand Union, it could fall short as it begins its push into the cheap car segment.

"I think the bigger challenge in India is that unlike Indonesia and South Africa, in particular, Datsun doesn't really have any existing brand equity," Hitchmough said. "It doesn't have that brand recognition and they're pretty much starting from scratch."

Saurabh Mukherjea, head of equities at Ambit Capital said so far all foreign carmakers in India have stuck to their core brands and simply launched a cheaper priced version of those brands.

"What Nissan is trying here is quite novel. It'll be interesting to see how it goes, but my sense is that they will find it very hard going," Mukherjea said. "Datsun is going into the core of Maruti heartland, Hyundai is also a strong player in the smaller car market, and I think Datsun will have an uphill battle ahead of it."

The unveiling of the first Datsun car - a $6,700 hatchback in India - is part of Nissan's revival of the Datsun brand that it retired in the early 1980s for emerging markets starting with India, Russia and Indonesia. The carmaker will eventually expand the brand into Southeast Asia, Latin America, the Middle East and Africa.

(Read More: Nissan to unveil Datsun in India in cheap-car push)

With other Datsun models to follow over the next three years with one that could be priced as low as $4,000, Nissan is joining the likes of other global auto giants like Toyota and Hyundai, which have already introduced ultra-low cost cars to tap into the growing segment in developing economies.

Nissan is trying to protect the premium brand name image that it's created with brands like Infiniti as it resurrects the Datsun brand in emerging markets, Vivek Vaidya, vice president, automotive & transportation Asia Pacific, Frost & Sullivan said.

"If very cheap cars are launched under the Nissan brand name, it does put pressure on the brand and if the lower end products become very successful then the higher end customers may turn their back on the brand," he added. "By launching a separate brand for lower range of cars, Nissan is trying to protect the image of the parent brand."

While India would be a challenging market for Datsun, Hitchmough said the brand could fare better in other emerging markets like Indonesia and South Africa.

"Look at South Africa and Indonesia, Datsun is kind of a known name even though it hasn't been around for the last 20 or 30 years-it has some recognition and there are still some Datsuns on the road. In those markets, there's already some residual awareness and maybe affection that may be built upon," Hitchmough said.

(Slideshow: World's 10 largest auto markets)

Datsun's global brand name dates back to the 1930s and was once used by Nissan for its cars sold outside of Japan.

Vaidya adds that Datsun would have to build a compelling storyline of the brand's heritage to hook in consumers.

"Another thing that would help them overcome brand recognition issue is point of retail - which initially at least - would be at the same Nissan dealership. This move would help them build the initial confidence about the brand," Vaidya said.

- By's Rajeshni Naidu-Ghelani; Follow her on Twitter @RajeshniNaidu