Nissan and China Partner Dongfeng to Invest $8 Billion

Nissan and its Chinese partner Dongfeng Motor Co. will invest 50 billion Yuan ($8 billion) and launch around 30 models in China over the next five years, the Japanese auto giant said Tuesday.

The two firms -- through their Dongfeng Motor Co. Ltd. (DFL) tie-up -- also plan to nearly double annual sales and launch a zero-emission electric car, in a bid to increase DFL's share in the world's largest auto market.

"Nissan's strong partnership with Dongfeng Motor Corporation has been the primary driver of its robust growth over the past eight years in the Chinese market," Carlos Ghosn, Nissan's chief executive, said in a statement.

"The new plan, with its investments in capacity, products and innovation, will ensure that China continues to be Nissan's largest global market."

China, which overtook the U.S. to become the world's top auto market in 2009, has become increasingly important for global players. Auto sales in China rose more than 32 percent last year to a record 18.06 million units.

But the sector has since lost steam after Beijing phased out sales incentives such as tax breaks for small-engined vehicles, first introduced to ward off the impact of the global financial crisis.

The government is considering new incentives to revive the sector. But an industry group predicted this month that auto sales growth was likely to slow this year, despite showing a slight rebound in June.

Analysts nevertheless welcomed the announcement, saying the outlook for China's auto market remained positive despite recent setbacks.

"You have very low car penetration, you have consumers with very high cash levels and we don't even have car loans starting yet in China," Scott Laprise, a Beijing-based auto analyst with brokerage firm CLSA, told Agence France Presse.

Nissan said DFL planned to achieve and maintain a 10 percent share of the Chinese market over the next five years. Ghosn told reporters at a press conference the Japanese group currently has a 6.2 percent share of the sector.

DFL also aims to increase sales from nearly 1.3 million vehicles in 2010 to more than 2.3 million units by the end of 2015, it added.

Sales of the first passenger vehicle sporting the Dongfeng Nissan brand Venucia are scheduled for next year, and a total of five new models will be launched under that brand.

The two firms will also build a new manufacturing facility in the eastern province of Jiangsu, which will reinforce existing plants in other parts of the country to achieve the 2015 sales target, Nissan said.

Another passenger vehicle-producing plant in the southern province of Guangdong is also due to start operations in 2012, and a separate factory in central China is set to be inaugurated this year.

Klaus Paur, China managing director for Synovate Motoresearch in Shanghai, said the Nissan-Dongfeng joint venture had a good position in the Chinese market.

"They believe that the lower-tier cities and the inland markets have potential, and they are ramping up production capacity in order to be ready to cater for that demand," he said.