Nissan braces for tough environment in China for Infiniti

BEIJING (Reuters) - Nissan Motor Co.'s(7201.T) luxury brand Infiniti is bracing for a tough start in China, even as it opened a high-profile "flagship plus" store in Beijing and pledged to beef up its presence in China.

Nissan - Japan's second largest auto maker after Toyota Motor Corp. (7203.T) by volume - is aiming to sell 100,000 Infinity cars by 2016, up from the 19,000 last year, according to two Nissan executives who spoke on condition of anonymity.

That represents one-fifth of the vehicles Infiniti is targeting to sell globally by 2016.

Nissan's chief executive Carlos Ghosn said earlier this year the company was aiming to take a 10-percent share of China's luxury vehicle market by 2016, more than tripling the brand's current market share in China.

Still, the two Nissan executives said late on Friday that Infiniti will likely have to hunker down for the next two years, or until local production of some Infiniti vehicles start in 2014.

That's because imported cars, including Infiniti models Nissan currently sells in China, are heavily taxed, and that makes it difficult for the brand to compete with some of the competitively priced cars from its German rivals like Audi, BMW and Mercedes-Benz, all of which produce cars in China.

"Until then, we have no way of boosting volume significantly, and our sales volume will have to remain relatively small," one of the two executives said.

Both executives said the Japanese yen's historic strength was also holding back their China business.

One of the executives said higher-margin cars like the beefy Infiniti QX full-size sport-utility vehicle and the FX car-SUV crossover were faring OK, but that "in most cases" Infiniti was not making money on other smaller models.

The Infinity brand was launched in China in 2007.

Allen Lu, general manager of Nissan's Infiniti business unit in China, told reporters on Friday at the opening of the Beijing super showroom that Infiniti planned to more than double the number of its Chinese outlets to between 140-160 over the next four years.

"We will be building mostly full-service dealerships in smaller cities, but will open some small outlets in major cities like Beijing," Lu said.

This year Infiniti is aiming to double sales to about 28,500 cars in China, but that is still a fraction of the more than 300,000 cars Audi AG sold in 2011.

Since late last year, some luxury brands, including Mercedes-Benz, have been cutting prices to push up their volume amid a market slowdown.

Lu said Infiniti would not become embroiled in a price war.

"Under the current (environment), we need to maintain a stable price and volume. In other words, I'd rather be giving up some volume than blindly pursuing more market share," he said.

(Reporting By Norihiko Shirouzu; Editing by Jeremy Laurence)