Nissan’s China Venture to Invest $7.8 Billion to Boost Output, Gain Sales

Nissan Motor Co.’s Chinese venture plans to invest 50 billion yuan ($7.8 billion) by 2015 to gain market share as economic growth boosts demand in the world’s largest auto market.

Dongfeng Motor Co. aims to raise annual vehicle sales to more than 2.3 million within five years from 1.3 million now as it increases the number of dealerships in China to 2,400 from 1,400, Nissan said in a statement in Beijing today.

Chief Executive Officer Carlos Ghosn, counting on growth in China to help make Nissan Japan’s most profitable carmaker for the first time since at least 1992, is aiming to boost its China market share to about 10 percent by 2015, from its current 6.2 percent.

“Nissan has been doing very well in China in the past few years on the popularity of models like the Tiida and Teana,” said Ricon Xia, a Hong Kong-based analyst at Mitsubishi UFJ Asset Management. “The Chinese market will play a much more important role for Nissan in the future, as it has potential like no other.”

Sales of the company’s Chinese-made vehicles more than doubled to 563,078 last year from 203,537 in 2006, according to the China Association of Automobile Manufacturers. The carmaker expects sales of the Infiniti luxury model in China to surpass 20,000 units this year,compared with 11,513 units in 2010.

Nissan, Japan’s second-largest automaker, plans to introduce about 30 products in China by 2015, including a fully electric car, it said in today’s statement.

Electric Car

China’s electric car demand will boom over the next five years as more models are introduced and subsidies may be expanded to more cities, Ghosn said in a briefing in Beijing today.

“China is key to our total development plan,” Ghosn said. “We believe we have potential to have a bigger market share in China.”

Nissan estimates its global vehicle sales will rise 10 percent in the 12 months started April 1. By comparison, Honda Motor Co. predicts a 6 percent decline and Toyota Motor Corp. expects a 0.9 percent drop, as the two rivals have yet to resume full production after Japan’s March 11 earthquake disrupted their supply chains.

Moody’s Investors Service raised Nissan’s credit rating today to Baa1 from Baa2, citing improved profitability, financial flexibility and global market position.

“Nissan’s production has recovered faster than expected and ahead of its peers,” Moody’s analyst Tadashi Usui said in a report today. “Nissan will further and gradually improve its credit profile by maintaining solid profitability.”

Income Forecast

Nissan targets operating income of 460 billion yen ($5.9 billion) in the year ending March 2012, while Toyota expects 300 billion yen and Honda estimates 200 billion yen. That would be the first time for Nissan to beat its two biggest competitors, according to Bloomberg data going back to 1992.

Dongfeng had the fastest sales growth among all Japanese automakers’ ventures in the first half, with deliveries rising 12.9 percent from a year earlier. That compared with a 12 percent drop by Honda and a 19 percent decline by Toyota.

Wuhan-based Dongfeng Motor was set up by Dongfeng Motor Corp. and Nissan in June 2003 with a total investment of 16.7 billion yuan. Its products include Dongfeng-brand trucks and buses as well as Nissan-brand sedans and compacts.

Nissan’s shares rose 1.5 percent to 864 yen in Tokyo trading today before the announcements. The carmaker is scheduled to report its first-quarter results tomorrow.

To contact the editor responsible for this story: Chua Kong Ho at kchua6@bloomberg.net

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