Nissan Plans $1.4 Billion Plant in Brazil to Boost Sales

Nissan Motor Co. is investing 2.6 billion reais ($1.4 billion) to build an auto-assembly plant near Rio de Janeiro as the carmaker boosts sales in Brazil’s fast-growing market and shifts output from Japan.

The factory in Resende, 100 miles (160 kilometers) west of Rio, will be able to produce 200,000 cars and utility vehicles based on the company’s compact “V” platform, Chief Executive Officer Carlos Ghosn said at an event in Rio today. It will employ 2,000 workers and open in 2014, according to Yokohama- based Nissan, which said it intended to build the plant in June.

“Brazil has a level of motorization that is way below its potential,” Ghosn said today in an interview in Rio. The sales “trend over the long term, there’s no doubt in my mind, it’s going to be up. An average of 5 percent increase a year is totally reasonable for Brazil.”

The country’s vehicle sales have risen at least 10 percent each of the past five years, and the market is now the world’s fifth-biggest by volume. The country raised taxes last month on certain vehicles with less than 65 percent of parts and materials made in the country, the Mercosur free-trade area or Mexico, to limit imports of low-cost vehicles.

“Brazil is going to be Renault’s second-biggest market in the world by the end of this year,” Ghosn, chief executive of both Nissan and Renault SA (RNO), said at a press conference in Brasilia on Oct. 1 after talks with President Dilma Rousseff. Ghosn was born in the state of Rio de Janeiro.

The Yen’s Effect

Japanese carmakers are also under pressure to shift vehicle production abroad as the yen strengthens, eroding earnings from vehicles shipped overseas. Toshiyuki Shiga, Nissan’s chief operating officer, said Oct. 4 the strong currency is a “very severe” situation for the company.

Nissan’s market share in Brazil is 1.7 percent, more than double the level a year ago, and the company said it aims to raise it to at least 5 percent by 2016.

“We are building this plant with a larger infrastructure than the 200,000 cars,” Ghosn said in an interview. “The 200,000 cars are only a first step into what should be a much bigger plant in the future.”

Renault ranked fifth in Brazil vehicle sales in September and Nissan 10th, according to the National Vehicle Manufacturer’s Association in Sao Paulo. Volkswagen AG (VOW), Fiat SpA (F), General Motors Co. (GM) and Ford Motor Co. (F) ranked ahead of Renault.

Renault, based in Boulogne-Billancourt, France, said yesterday it plans a 212 million-euro ($283 million) expansion of the Curitiba factory and aims to add 13 new models in Brazil between 2012 and 2016.

Separately, Volkswagen said Oct. 4 it will spend 3.4 billion euros in Brazil through 2016 as part of a five-year investment plan announced in September.

Nissan rose 28 yen, or 4.3 percent, to 686 yen today in Tokyo Stock Exchange trading. Renault rose 1.77 euros, or 7.5 percent, to 25.495 euros today in Paris.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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