Nissan's Revival Plan Bets on New Models in China

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Last updated at: (Beijing Time) Wednesday, August 21, 2002

Nissan's Revival Plan Bets on New Models in China

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Japan's number three auto maker Nissan has announced an intention to put all varieties of its new automobile models in its proposed joint venture (JV) manufacturing plant in China to speed up the company's revival plan.

Nissan is still in talks with China's flagship automobile company -- the Dongfeng Automobile Co. Ltd. According to a framework agreement, Nissan and Renault, which is now the largest shareholder of Nissan, will form a partnership with Dongfeng to produce three passenger car models -- the Cefiro, Sunny and March - and one mini-bus model. Its turnout is expected to reach 150,000units in three years.

If the final deal is sealed, the new company will become the only JV able to produce all categories of vehicles in China, since Nissan and Dongfeng's former cooperation had led to the production of localized "Bluebird" sedans and numerous truck models.

Nissan's President Carlos Ghosn has been busy shuttling between Beijing and Hubei Province, where Dongfeng's factories are based, offering solutions to a few technical snags to the promising JV since the beginning of this year.

An 80-member expertise team from Nissan has concluded a thorough investigation of Shiyan and Xiangfan cities in Hubei. Theformer is Dongfeng's headquarters and the latter Dongfeng's car production base.

In an earnest bid to close the deal, Nissan has set up a special department responsible for the business in China with President Ghosn taking the lead.

Previously, Nissan's headquarters divided the global business management into four markets - Japan, North America, Europe and other regions. The establishment of the new division means that China has been singled out from "other regions". Its status has been raised to an equal footing with American and European markets.

Nissan has eyed China as a key market to realize its revival plan, hoping the contribution from China can help avert the company's heavy losses.

In 1999, France's Renault SA bought 36.8 percent of shares of the loss-making Nissan to become its largest shareholder, and helped bolster it.

The new JV in China will increase Nissan's penetration of the China market, which will spread its influence to other Asian regions.

Major international auto makers believe that China will become the world's third largest auto market in less than a decade, when the demand for cars alone is estimated at 2 million units.

Encouraged by this belief, foreign car makers have shown a soaring enthusiasm to find their respective Chinese allies and expand their production capacity in the country after its entry into the World Trade Organization at the end of last year.

The U.S. General Motors announced in June it will jointly invest 99.6 million U.S. dollars with the Shanghai Automobile Industry (Group) Co. and the Liuzhou Wuling Motors in developing the Wuling plant in Liuzhou, landlocked in southwest China's Guangxi Zhuang Autonomous Region, into the largest automobile production center in China.

Russia's number three auto giant Sok made its China debut in Beijing's auto show in May. It took the occasion to announce that the company is planning to invest in a 200 million-US dollar car JV in China, making it the first Russian car company to enter China.

Japan's Mazda Motors in May started the joint production of itsbest-selling sedan, the Familia, in a JV with a factory directly affiliated to the China First Auto Works in Hainan.

"Teaming up with these world-class auto makers provides a golden opportunity for us to catch up," said Miao Yu, general manager of Dongfeng. He believed it an ideal way for Chinese auto manufacturers to get involved in the international market.

The company established in 1969 had a similar debt-ridden experience as Nissan. However, it has made an impressive achievement for its foreign partners through reforms. By conducting internal reshuffles and technical innovation, it stopped making losses in 2000. Dongfeng has seen a total of 2.3 billion yuan in profits in the last three years.

Miao said that Dongfeng's growing competitiveness had made it qualified to seek intensive cooperation with foreign partners.

Nissan holds a special affection for Dongfeng. The joint venture company it set up with Dongfeng in Guangzhou, capital of south China's Guangdong Province, in 2000 to produce a car based on the technology of its popular "Bluebird" turned out to be better than expected and leading to a broadening of bilateral cooperation.

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