Nissan to double China capacity

ZHENGZHOU, China/HONG KONG Mon Sep 20, 2010 8:22am EDT

A man walks past a logo of Nissan Motor Co at the company's headquarters in Yokohama, south of Tokyo, July 29, 2010. REUTERS/Toru Hanai

A man walks past a logo of Nissan Motor Co at the company's headquarters in Yokohama, south of Tokyo, July 29, 2010.

Credit: Reuters/Toru Hanai

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ZHENGZHOU, China/HONG KONG (Reuters) - Japan's Nissan Motor (7201.T) plans to double its capacity in China by 2012, joining a host of peers that have made similar recent moves to capture a bigger slice of the world's biggest auto market.

Nissan's new plan, which would see its annual capacity rise to 1.2 million units, exceeds the company's earlier target by 20 percent, underscoring its strong interest in China -- a rare bright spot for automakers as the global industry struggles to emerge from a sharp downturn.

Japan's third-largest automaker and its 44 percent owner Renault SA of France (RENA.PA) are also steering clear of General Motors' GM.UL upcoming initial public offering and won't subscribe to its shares.

Nissan would like to eventually take 10 percent of the China market, nearly double its current share of about 6 percent, chief executive Carlos Ghosn said at an event to launch a new SUV-making plant in the central China city of Zhengzhou.

"Among the Japanese carmakers ... Nissan holds the number one position," he said. "Still, we believe we have the potential to earn a higher market share through our partnerships with Dongfeng and Zhengzhou Nissan."

Nissan's announcement is the latest of a raft of similar plans by foreign auto makers looking to expand their China output to capitalize on the market's rapid growth.

General Motors GM.UL, which operates auto ventures with major Chinese auto groups SAIC Motor (600104.SS) and FAW Group, said last week that it sees the need to continue growing capacity at its China joint ventures.

Korea's Hyundai Motor (005380.KS) is building a third plant in China, boosting its total production capacity in the country by two-thirds to 1 million units.

Separately, Ghosn said "No" when asked by Reuters on the event's sidelines if Nissan-Renault was looking to buy shares in General Motors' upcoming IPO.

Speculation has been rife that GM is looking for strategic investors in the run-up to its highly anticipated IPO following its bankruptcy filing at the height of the global downturn.

GM's China partner, SAIC has been mentioned as another potential investor, though it could face difficulties due to political sensitivities.

Nissan runs an auto venture with Dongfeng Motor Group Co Ltd (0489.HK). Dongfeng's shares ended up 5.3 percent in Hong Kong. Japan's stock market was closed for a public holiday.

JAPANESE LEADER

Nissan is the top Japanese automaker in China, overtaking Toyota Motor Corp (7203.T), thanks to a model line-up that included small cars that met the government's tax incentives.

But it has been lagging the market's growth recently due to a shortage of capacity, and officials have welcomed a slight slowdown in the market's sale for that reason.

Ghosn also told reporters that Nissan was expanding its other two production bases in China, in the cities of Huadu and Xiangfan, in addition to the new plant in Zhengzhou.

China's vehicle sales jumped nearly 48 percent in the first half of 2010 but analysts and automakers say the growth is expected to return to normal after the breakneck speed in the past year fueled by the government's stimulus.

China's car sales in August jumped nearly 60 percent from a year earlier, bouncing back strongly after sluggish sales in the summer months with help from central government subsidies for fuel-efficient models.

Although many automakers were confident that China's auto sales could rise about 25 percent to 17 million units this year, some analysts were more cautious.

"There are not many sales forecasts for next year and the golden week (starting on Oct 1) sales will be critical," said Jonny Wong, an analyst at Yuanta Research. "Forecasts of 17 million unit sales this year could be a bit high."

Nissan said the new Zhengzhou SUV plant has total investment of 1 billion yuan ($148.7 million), and will be run by Zhengzhou Nissan Co Ltd, a joint venture between Nissan and Dongfeng.

The new plant would have an annual capacity of 180,000 units and together with Zhengzhou Nissan's first plant, the company's total production volume would reach 240,000 units by 2012 after the expansion, Zhengzhou-Nissan said in a statement.

($1=6.723 Yuan)

(Editing by Ken Wills and Muralikumar Anantharaman)

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