Even when you’re the biggest game in town, you can always get bigger. That’s the philosophy behind the expansion of Nissan Motor Co. in China. Already the largest Japanese automaker in China, Nissan has announced plans to build a massive $785 million production plant in the northeast region at Dalian City.
Tightening grip on the largest market
Globally, China is the world’s largest auto market, and Nissan’s Dalian City plant will only serve to strength the automaker’s $191 billion investment in Chinese consumers. General Motors Co. and a host of other global automakers are also keen on China auto sales, particularly since other markets worldwide are experiencing hiccups due to recession and related bank panic. The result of the influx of interest in China as a market has created turf wars that should continue to boil in the upcoming years, auto industry experts predict.
The five fiefdoms
Reuters reports that in the past, foreign brands in China had unofficially divided the nation into five fiefdoms that were based upon local partnerships with Chinese businesses. The recent explosion of foreign business has changed the rules, however. Volkswagen AG has carved additional space in the east and north of China through partnerships with SAIC Motor Corp. and FAW Group.
In the meantime, Japanese automakers have taken control of China auto sales in the south, although VW is in the progress of building a plant in the southern province of Guangdong that will no doubt ruffle some feathers. A representative of the German automaker noted that the company’s market share in the southern region had risen to 15.8 percent from 12 percent just two years before.
General Motors, whose business had been centered primarily in Shanghai, recently revealed plans to build a facility in the central China city of Wuhan, and area dominated by Nissan. Ford in turn is moving in on Hangzhou with plans to build a plant. Hangzhou is very close to Shanghai and GM’s territory.
Cutting the competition
With a strong base in Dalian City, which happens to be the highest-rent coastal city in northeast China, auto industry experts predict that Nissan vehicles would easily be able to gain market share against Volkswagen’s Jetta and Toyota’s Corolla, both of which are highly popular in the region.
“Nissan will become a major rival for Volkswagen and Toyota in north China with the new plant. It will be cheaper and faster to ship parts to Dalian compared to Wuhan as Dalian is a major port city not that far from Japan,” said associate research director for Greater China Sheng Ye, who works for the industry consulting firm Ipsos.
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Capacity for success
Nissan’s Dalian City plant, a joint venture between the automaker and local partner Dongfeng Motor Group Co., will go into early production in 2014, with a production capacity of 25,000 cars. By 2017, Nissan expects the plant to produce 240,000 annually.
“They will be making Nissan’s more upscale SUVs, sedans and MPVs in the new plant. A ground-breaking ceremony has been planned for later this month,” said an unnamed Nissan representative.
Target for growth
Nissan CEO Carlos Ghosn has a global sales target of 2.3 million vehicles in 2015, and in order to reach that goal, Nissan plans to launch 30 new vehicles in China, including an EV called the Venucia. Nissan will also begin making its Infiniti brand at a $315 million plant in Xiangyang in central China, by 2014. Infiniti will challenge Audi, Mercedes Benz and BMW AG in the luxury market.