Nissan to double China capacity to tap hot market
ZHENGZHOU, China/HONG KONG (Reuters) - Japan's Nissan Motor Co Ltd plans to double its production capacity in China to 1.2 million units by 2012, as it aims for a 10 percent share of the world's biggest auto market.
The new plan is 20 percent above Nissan's earlier target, underscoring the car maker's strong interest in China, which has been a major bright spot for many automakers as the global industry struggles to recover from a steep downturn.
Nissan, 44 percent held by France's Renault SA, runs an auto venture with Dongfeng Motor Group Co Ltd, which on Monday announced the opening of its first sport utility vehicle (SUV) plant in the central Chinese city of Zhengzhou.
"Among the Japanese carmakers, which represent 20 percent of total sales in China, Nissan holds the number one position," Chief Executive Carlos Ghosn said at the opening ceremony for its new SUV plant.
"Still, we believe we have the potential to earn a higher market share through our partnerships with Dongfeng and Zhengzhou Nissan. Our current objective is 10 percent." said Ghosn.
Nissan is now the top-selling Japanese automaker in China, overtaking Toyota Motor Corp, thanks to a model line-up that included small cars that met the government's tax incentives.
But it has been lagging the market's growth recently due to a shortage of production capacity, and officials have welcomed a slight slowdown in the market's sale for that reason.
Separately, Nissan-Renault has no plan to buy shares in General Motor's upcoming initial public offering, Ghosn told Reuters on the sidelines of the ceremony.
Ghosn also told reporters that Nissan was expanding its other two production bases in China.
"Our three key manufacturing bases in Zhengzhou, Huadu and Xiangfan, we will nearly double Nissan's current production capacity in China to 1.2 million vehicles by 2012," he said at the opening ceremony. "This is 200,000 more cars than we announced at our year-end results this past May."
GROWTH SEEN NORMALISING
China's vehicle sales jumped nearly 48 percent in the first half of 2010 but analysts and auto makers say the growth is expected to return to normal after the breakneck speed in the past year fueled by government's stimulus.
Although many automakers were confident that China's auto sales could rise about 25 percent to 17 million units this year, some analysts were a bit cautious.
"There are not many sales forecasts for next year and the golden week (starting on Oct 1) sales will be critical," said Jonny Wong, an analyst at Yuanta Research.
"Forecasts of 17 million unit sales this year could be a bit high," he added.
Nissan said the new SUV plant in Zhengzhou has a total investment of 1 billion yuan ($148.7 million), and will be run by Zhengzhou Nissan Co Ltd, a joint venture between Nissan and Dongfeng.
The new plant would have an annual capacity of 180,000 units and together with Zhengzhou Nissan's first plant, the company's total production volume would reach 240,000 units by 2012 after the expansion, Zhengzhou-Nissan said in a statement.
"The Zhengzhou Nissan plants -- currently our base for light commercial vehicles and sport utility vehicles -- now comprise our second-largest production site in China after Huadu," Ghosn said in the statement.
China's car sales in August jumped nearly 60 percent from a year earlier, bouncing back strongly after sluggish sales in the summer months with help from central government subsidies for fuel-efficient models.
($1=6.723 Yuan)
(Editing by Muralikumar Anantharaman)