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Nissan to suspend second phase of factory in Chennai

“We didn’t suspend because we do not believe in the potential of India’s internal market.” — Carlos Ghosn, Nissan CEO

Nissan Motor Co, Japan’s third-biggest carmaker, said it will suspend the second phase of its factory being built in the southern Indian city of Chennai until global demand for cars recovers.

“We didn’t suspend because we do not believe in the potential of India’s internal market or the capacity to export,” CEO Carlos Ghosn said at the India Economic Summit organized by the World Economic Forum in New Delhi.

Resumption will depend on when the decline in the world market stops, he said.

Nissan, which is building the plant in partnership with Renault SA, said in June that the Chennai factory is key to its European operations, as building cars in India will be as much as 5 percent cheaper than in Europe even after logistics costs and duties.

The first phase of the factory will start operations early next year, Ghosn said. Chief Operating Officer Toshiyuki Shiga said on Oct. 21 that global car demand remains “fragile.”

Nissan will make a new entry-level car for the European and Indian markets at the Chennai factory, with plans to export about 110,000 units in the year ending March 2011, executive vice president Colin Dodge had said on June 4.

The Japanese company, which proposes to introduce nine models in India by 2012, is aiming for a 5.7 percent share of the passenger vehicle market by that year in the country, where incomes have doubled in the past eight years.

Ghosn said Sunday that next year will be a tough year for Europe and Japan, while China and India will play a crucial role in world economic recovery.

Nissan’s affiliate Renault temporarily suspended its India investment and will resume when the economy and auto sales revive, Dodge said in June. The two companies originally planned to spend 45 billion rupees (US$964 million) in Chennai by 2015.

Chennai is home to factories operated by Ford, Mitsubishi Motors Corp, BMW AG and Hyundai Motor Co.
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