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March 24, 2010

RESEARCH EXTRACT: Nissan in China

Nissan Motor sales in China last year rose 48% to a record 518,968 passenger vehicles, and aims to sell 600,000 passenger vehicles next year, up 16%. Nissan’s Chinese joint venture has said it expects its total sales in China, including commercial vehicles, to reach 1m units in 2010, hitting the milestone ahead of the earlier planned 2012.

Nissan Motor sales in China last year rose 48% to a record 518,968 passenger vehicles, and aims to sell 600,000 passenger vehicles next year, up 16%. Nissan’s Chinese joint venture has said it expects its total sales in China, including commercial vehicles, to reach 1m units in 2010, hitting the milestone ahead of the earlier planned 2012.

The Japanese automaker entered the Chinese market in 2003, establishing a wide-ranging partnership with one of the Chinese ‘Big Three’, Dongfeng Motor . Nissan had operated as a low-key partner with Dongfeng, making its Bluebird sedan at two plants owned by a Dongfeng subsidiary.

But the new deal was a game-changer. Funded by the largest single investment in the Chinese auto industry, US$1.03bn, it saw the establishment of a 50:50 joint venture with a scope that is significantly greater than other Chinese JVs. The joint company incorporates Dongfeng’s buses, trucks and commercial vehicles, in addition to a full range of Nissan passenger vehicles.

The newly constituted company is called Dongfeng Motor Co, but all cars it builds carry Nissan badges. The existing Bluebird plants also became subsidiaries of the joint venture, and received major investments and increases in capacity. The Huadu plant in the southern city of Guangzhou, Guangdong province, grew from 40,000 to 150,000 while the other plant, at Xiangfan, Hubei province, went from 20,000 to 120,000 units.

In addition to Nissan-brand cars and trucks, the JV will build 330,000 Dongfeng-brand trucks in existing Dongfeng Motor plants such as Shiyan and Xiangfan. The partnership will also create a new passenger vehicle R&D centre in addition to reinforcing Dongfeng’s existing R&D resources in commercial vehicles.

New Nissan car models, the Teana large sedan and Tiida small car, were launched in 2005, followed by the Fuga large sedan alongside Teana at the Xiangfan plant. Combined capacity of the Huadu and the Xiangfan plants was increased to 270,000 vehicles in 2006 and to 460,000 by 2009. Further new models joined the range in 2008, including the Qashqai (branded Xiakoe in China) and X-Trail SUVs. The next generation Nissan March (Micra) will be produced in China from 2010.

Sales are handled by a separate company called Dongfeng Nissan Passenger Vehicle Co, which reported that passenger vehicle sales totalled a record 225,073 vehicles for the first half of 2009, an increase of 41.3% against the first half of 2008.

Further expansion is planned, which will take total production capacity of Dongfeng Nissan to 700,000 units. The expansion will mainly be concentrated at Huadu, where land for building an additional production line has been acquired. Huadu builds six models: Qashqai, Livina Geniss, Livina, Sylphy, Tiida sedan and Tiida hatchback.

Further growth will come from a new LCV plant in Zhengzhou, Henan province. Production will start in 2010. DFL, Dongfeng Automobile (DFAC) and Nissan (China) Investment (NCIC) have invested US$145m at this plant, which will have installed capacity of about 120,000 vehicles a year. Nissan also launched Infiniti in China in July 2008 with the G35 sedan, FX35/45 SUV and M35 sedan.

DFL also will expand its sales network for both passenger vehicles and LCVs. The number of dealerships will increase from 300 to 420 for passenger vehicles, from 420 to 630 for LCVs and from 250 to 380 for heavy and medium commercial vehicles from 2007 by 2012. DFL is also increasing local content levels from 70% in 2007 to 90% in 2012.

This article is extracted from just-auto’s research report China automotive market – forecasts to 2016 (download). The report provides historic and forecast sales volumes for the major foreign and domestic car makes in China, including vehicle sales forecasts for major automotive joint ventures to 2015.

Starting with a brief history of the market, the report discusses the structure, foreign direct investment (FDI), promotion of future technologies, geographical structure of the industry, and concludes by reviewing the activities of all major domestic and foreign car makers.

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