Nissan Motor’s 50-50 Chinese joint venture with Dongfeng Motor likely won’t achieve its revenue and operating margin targets this year due to lower passenger car prices and more expensive raw materials, the head of the venture has said.
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According to Reuters, Dongfeng is in its final year of a four-year business plan that runs to the end of March 2008, and had targeted sales of 600,000 vehicles – double what it sold in 2003 – and revenues of RMB80bn ($US10bn), more than double the level of four years ago.
It had predicted operating profit of RMB8bn, yielding a margin of 10%, the report added.
“The biggest reasons for the undershoot are the roughly 30% rise in raw materials costs since we announced the business plan, as well as a faster-than-expected fall in passenger car prices,” Katsumi Nakamura, president of the joint venture, told Reuters ahead of the Shanghai motor show.
He reportedly that he nonetheless expected revenues to top RMB70bn as the volume target of 600,000 units is met, and stressed that an operating margin near 10% was still “quite good” against an estimated industry average of 3%.
Nakamura also told Reuters Dongfeng would aim to announce a new, three-year business plan by the end of this year.
Under that plan, the commercial vehicle division, whose models are sold under the Dongfeng brand, would continue to drive towards a goal of becoming the top brand in China and number three in the world, with a bigger focus on exports as it continues to improve vehicle quality.
Reuters said Dongfeng exported just 1,300 trucks in 2003, raising that to 10,000 units last year. In 2007, Nakamura told the news agency, it would aim for exports of 13,000 trucks, mainly to countries in Africa, the Middle East and other developing markets.
Reuters noted that Dongfeng and Nissan have been in talks with Volvo on a possible investment by the Swedish truck maker in the venture which, if carried out, could see Volvo Nissan as Dongfeng’s partner in making heavy and medium-duty commercial vehicles and engines.
Volvo recently took over truck maker Nissan Diesel.
Nakamura told the news agency those talks were ongoing, with Volvo officials visiting China almost weekly. He reportedly said he hoped to reach a conclusion by the end of this year.
On the passenger vehicle side, Nakamura also said there was still room to reduce production costs through stepped-up localisation of parts, already at 100% for its trucks and buses.
“A few years ago, it wasn’t possible to buy specialised steel products locally, and we had to import them from Japan,” he told Reuters. “Now, you can get almost any kind of steel here.”
The venture will also benefit from the planned local production of continually variable transmissions (CVTs) by Japanese unit Jatco in two years, he added.
