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Nissan Plans to Raise China Factory Capacity Nearly 70% by 2012

Carlos Ghosn, of Renault SA and Nissan Motor Co.
Carlos Ghosn, chief executive officer of Renault SA and Nissan Motor Co., poses for a photograph following an interview at the Beijing Auto Show in Beijing, on April 23, 2010. Photographer: Tomohiro Ohsumi/Bloomberg

Nissan Motor Co., Japan’s third-biggest carmaker, will raise production capacity by almost 70 percent in China even as it expects sales growth to slow.

Nissan Chief Executive Officer Carlos Ghosn, speaking today at the Beijing Auto Show, said the automaker aims to have the capacity to make to 900,000 vehicles a year in China by 2012 and plans further increases after that. That exceeds what the company had said previously and represents a 68 percent increase over its current annual capacity of 535,000 vehicles.

“Nissan is going the right way,” said Takeshi Miyao, an analyst at auto consulting company Carnorama in Tokyo. “It’s important for each automaker to gain share now. Later is too late.”

Industrywide auto sales growth in China may slow this year after surging 46 percent last year to 13.6 million units, surpassing the U.S. as the world’s largest market. Nissan’s plan to raise capacity amid slowing growth suggests it may outpace rivals in China.

Nissan is spending 5 billion yuan ($732 million) to expand its plant in Guangzhou, Guangdong province to build as many as 600,000 vehicles a year by 2012, from 430,000 units currently, the company said. It builds models including the Tiida compact and Livina series at the factory.

First Quarter Sales

The carmaker based in Yokohama, Japan, boosted sales in China 68 percent to 243,000 units in the first quarter of this year, Nissan said in a statement. Its China sales rose 39 percent to 756,000 units in 2009. Nissan sales will rise by about 12 percent, including imports, vehicles this year, the company said.

China’s auto sales growth may be between 10 percent and 15 percent next year as the government may end tax breaks on small cars, Ghosn said in an interview today in Beijing.

Nissan shares closed 0.4 percent lower at 792 yen in Tokyo.

The company plans to sell “hundreds” of its Leaf electric vehicles in China in 2011, Ghosn said in the interview. The Leaf will be introduced in Japan and the U.S. this year.

The Chinese government is expected to announce in July new incentives for buyers of electric and hybrid cars as it aims to reduce pollution and improve fuel efficiency in the nation. Ghosn said today he expects the subsidies in the second half of this year.

Nissan will also introduce its March compact in China in the second half of this year, the company said. Carmakers there benefited from a government program last year that cut the sales tax on cars with engines of 1.6 liters or smaller.

Total vehicle demand may rise about 17 percent to 16 million units in 2010, Xu Changming, a research director at China’s State Information Center, said yesterday. Passenger-car sales may increase 21.5 percent to 10.5 million, he said.

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