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Japanese auto giant Nissan Motors said Wednesday it was considering merging its two vehicle joint ventures in China into one entity.
"We are studying the possibilities of integrating Zhengzhou Nissan into the Dongfeng Motor Co Ltd," said Nissan Senior Vice-President Toshiyuki Shiga.
The Japanese carmaker and Chinese financial conglomerate Citic Group control 30 and 70 percent stakes in Zhengzhou Nissan, which produces pickups and sports utility vehicles with an annual capacity of 60,000 units in central China's Henan Province.
Dongfeng Motor Co Ltd, the 50-50 joint venture between Nissan and Dongfeng Motor Corp, is the Japanese firm's largest operation in China, established last year with a registered capital of US$2 billion.
The venture is producing Nissan brand passenger cars and Dongfeng marque commercial vehicles with an annual production of more than 300,000 units in central China's Hubei Province and in southern Guangdong Province.
"Although Zhengzhou Nissan is excellent in terms of product quality and productivity... its scale is not competitive in China, so we want to integrate it into Dongfeng Motor Co Ltd," Shiga said Wednesday in Beijing.
Analysts say the merger will also pave the way for French car producer Renault, which owns a 44 percent stake in Nissan, to set up a passenger car joint venture with Dongfeng, one of China's biggest automakers.
Renault announced last month that it will form a joint venture with Dongfeng to start to produce cars in China in 2006 with an annual capacity of 300,000 units.
But it has not revealed the size of the investment in the joint venture or its expected location.
China's new auto industry policy, issued last month, permits foreign automakers to set up a maximum of two joint ventures with different Chinese partners to make the same categories of vehicles.
The policy also stipulates that if a foreign automaker controls a relatively majority stake in another foreign automaker, they will be treated as one entity in China when it comes to deciding the number of Sino-foreign joint ventures that will be allowed.
In another development, Nissan President Carlos Ghosn said: "There's no problem in China's automobile market (although growth is slowing down)."
The growth of China's total vehicle market declined to 21 percent during the first half of this year from more than 30 percent last year with that of passenger car segment down to 30 percent from more than 70 percent.
"Twenty-one percent is an excellent number and even 10 percent will still be a very good rate, "compared with growth of 1 percent in the United States and 0 percent in Europe in the first half of this year, and a 4 percent drop in Japan over the past three months, Ghosn told reporters.
"The market could not have growth of 50 or 60 percent every year for a long time."
He said that Nissan would not change its objectives in China from 2003 to 2007.
Dongfeng Motor Co Ltd will double its annual sales and turnover to 620,000 vehicles and 80 billion yuan (US$9.6 billion) respectively, according to the company's five-year plan for 2003 to 2007.
The joint venture sold 160,000 automobiles, including 35,000 cars, during the first half of this year.
"Everything has been fixed (for the joint venture) between now and 2007. The decision we have announced is conservative for the market," Ghosn said.
"If the market slows down more than our expectations, it will only affect our investment after 2007."
Ghosn predicted that China's car market will grow by 14 percent this year.
"We will be more aggressive for localization in passenger vehicle business in China to lower costs...and accelerate transfer know-how to China in commercial vehicles to control quality," he added.
Dongfeng Motor Co Ltd Wednesday launched Nissan's Teana luxury sedan, which will be produced at the venture's plant in Xiangfan in Hubei Province.
But the prices of the 3.5-litre V6 Teana have not been revealed.
The venture is now producing Nissan's Bluebird and Sunny smaller sedans at its plant in Guangdong Province.
(China Daily July 22, 2004)
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