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Nissan building `Huadu No. 2'

Nissan Motor Co, Japan's third-biggest automaker, has started building a second car production plant in Guangzhou, China, to increase its sales in the world's fastest-growing auto market.

The Huadu No. 2 plant will start operating next year and will have capacity to produce as many as 150,000 units a year, Nissan's senior vice president Katsumi Nakamura said at a press conference in Tokyo. The plant will make as many as four car models, he said.

Tokyo-based Nissan, 44.4 percent owned by Renault SA, is betting its new plants in China and the US will be the key to meeting the automaker's goal of raising annual sales by 1 million units over the three years to 2005. The Japanese automaker aims to sell 550,000 vehicles a year in China by 2006 with its local partner Dongfeng Motor Corp.

"The challenge for Nissan and other Japanese automakers in China is to make sure that they're able to sell what they make," said Norihito Kanai, who helps manage the equivalent of US$2.5 billion at Meiji Dresdner Asset Management Co. "Because everyone is upbeat about the growth of the Chinese vehicle market, competition is likely to intensify."

The automaker has already released the Bluebird sedan and Paladin sport-utility vehicle in China. It plans to start producing Sunny compact cars in July at its current Huadu plant and will begin making Teana luxury sedans next year at another plant in Xianfan.

Of Nissan's 2006 China sales target, 330,000 vehicles will be Dongfeng-brand trucks and buses and 220,000 will be Nissan-brand cars and light commercial vehicles, Nakamura said. He expects China's total auto market may grow to about 5 million units in 2006, from 3 million in last year.

Nissan and Dongfeng earlier this week said their new joint venture Dongfeng Motor Co will start operations on July 1. Wei Miao, president of Dongfeng, will become chairman of the new company and Nakamura, who will resign from Nissan later this month, will become its president.

The venture's passenger car production capacity of 220,000 units will come from three factories, the two Huadu plants and one in Xianfan, Nakamura said. The new company has no plans to establish new truck factories but will assess Dongfeng's plants and decide what it can and can't use, he said.

The venture will halt small truck output at the Xianfan plant and will only make passenger cars there, Nakamura said.

Nakamura said the venture will start exporting commercial vehicles in the next one or two years to regions including Asia.

"We have a desire to export trucks and by exporting we can improve the quality of the trucks made in China now," he said.

"We need targets that are easy to understand" to motivate workers, he said.

The new venture plans to buy 11-liter commercial vehicle engines from Volvo AB, the world's No. 2 heavy truck maker, and plans to cooperate with Nissan's truck affiliate Nissan Diesel Motor Co to share engineering expertise and jointly develop trucks in China.

The new company will also "make a good use" of Nissan and Renault's alliance in purchasing parts, Nakamura said, without elaborating. Nakamura said the venture will post an operating profit in the first year and detailed forecasts will be announced by the end of November along with the company's business plan.

Nakamura also said he plans to use about 50 percent of local parts in the China-built Sunny compact, more than the 40 percent required by the Chinese government. The percentage of local content will differ in each model, depending on the model's sales.

The venture will build 2-liter engines for the Sunny in China using existing production facilities and is now studying where it will make the engine for the Teana sedan, he said.
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