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Nissan CEO Sees 2016 Mexico Output Jumping to 1 Million

Nov. 13 (Bloomberg) -- Nissan Motor Co. is accelerating operations in Mexico to allow the production of 1 million vehicles annually within three years, putting the country on par with Japan as an export hub for the carmaker.

About 700,000 of that total will be exported to such markets as the U.S., Canada and South America, Nissan Chief Executive Officer Carlos Ghosn said.

“Seven hundred thousand exported from one country is going to probably make Mexico as important as Japan in terms of export of cars for Nissan,” Ghosn told reporters yesterday. “Mexico is a very competitive country.”

Nissan, already the biggest automaker in Mexico, yesterday opened a $2 billion plant that will be its third in the Latin American nation. Ghosn this month announced an overhaul of the company’s management as he aims for an 8 percent operating profit margin by the year ending March 2017, after the GT-R and Maxima maker cut its annual profit forecast by 15 percent.

The new factory, in Aguascalientes, will initially produce Sentra small cars and is designed to build as many as four different models per assembly line. Nissan declined to say what else will be built there.

Japan’s second-biggest automaker also operates another plant in Aguascalientes, which is about 300 miles northwest of Mexico City, and one in Cuernavaca, about 40 miles south of the capital.

Ghosn’s Offensive

Under Ghosn, Nissan’s production capacity in Mexico has surged to supply the domestic market as well as take advantage of lower costs and trade agreements to export vehicles.

The company is the country’s domestic sales leader, according to the Mexican Automobile Industry Association. It built 584,880 vehicles in Mexico in the first 10 months of the year, 23 percent of the nation’s automobile production and more than any other manufacturer, according to the auto industry group known as AMIA. Nissan’s output in Mexico last year totaled 683,520.

“By the end of 2016, the plan is 1 million cars out of Mexico,” Ghosn said in a Bloomberg Television interview. “This new plant will allow us to continue our offensive on the Mexican market, and to be able to support the U.S. operation.”

Nissan rose as much as 1.8 percent to 922 yen in Tokyo trading, before changing hands at 915 yen as of 12:51 p.m local time. The stock has gained 13 percent this year, trailing the 47 percent gain for the Topix Transportation Equipment Index.

Expansion Spending

The maker of Pathfinder SUVs and Leaf electric cars this month cut its full-year profit forecast on slower sales in some emerging markets and a recall of 910,000 vehicles.

Nissan has said it’s spending more than $5 billion to expand capacity in the U.S., Mexico and Brazil. The new Aguascalientes plant employs 3,000 people and has initial capacity to make 175,000 vehicles a year, Nissan said. That will bring the company’s total Mexican capacity to about 850,000.

The owner of the Infiniti and Datsun brands built the new Aguascalientes plant in 19 months. It has also attracted suppliers to the Mexican city, where billboards advertise upscale homes in Japanese and Spanish.

The new factory has stamping, body, paint, injection and bumper-paint, as well as assembly operations. It’s situated on 1,137 acres (460 hectares), 2.5 times the land are of Nissan’s first factory in Aguascalientes, according to the company. Nissan could expand into empty land around the plant.

‘Important Strengths’

The Nissan plant helps “consolidate us as a country that has important strengths in the automobile sector,” Mexican President Enrique Pena Nieto said in a speech at the factory opening. “We’re making the necessary adjustments for more investment to come to our country, both domestic and foreign.”

Mexico may become the world’s seventh-largest auto producer in the coming years from its current rank as eighth as more companies make new investments, Pena Nieto said.

The nation’s auto output climbed to 2.51 million vehicles during the first 10 months of the year, up 3 percent from the same period a year earlier, according to AMIA. Production climbed 13 percent year last year.

Honda Motor Co. and Mazda Motor Corp. are building plants in central Mexico that will open next year, followed by a factory of Volkswagen AG’s Audi unit that will open in 2016.

To contact the reporters on this story: Brendan Case in Aguascalientes, Mexico at bcase4@bloomberg.net; 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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