According to Reuters, Nissan Motor Co. (NSANY) has revealed its plans to construct a ¥5 billion ($785 million) plant in the Dalian city, China. The facility is a part of the company’s planned investment of ¥30 billion ($4.7 billion) in China by the end of 2015.
The Dalian plant is jointly owned by Nissan Motor and local partner Dongfeng Motor Group Co. It will start production in 2014 with an initial capacity of manufacturing 25,000 cars. Nissan expects to enhance the capacity to 120,000 vehicles in 2015 and eventually reach a target of 240,000 cars by 2017.
Nissan plans to escalate sales in China to 2.3 million vehicles by 2015. To achieve the target, the company plans to launch 30 new products in the region. Electric vehicles will also be introduced with a joint venture with Venucia.
Further, the company intends to penetrate more in China with the production of Infiniti cars at the plant in Xiangyang located in the central Hubei province in 2014. With an investment of $315 million, the Xiangyang plant will provide tough competition to Audi, Mercedes Benz and BMW in the luxury segment.
The auto market in the emerging economies has sufficient growth opportunities for the automakers. Auto sales in China, in May 2012, have soared 16% to 1.61 million. The growth was driven by strong demand for passenger vehicles. According to China Association of Automobile Manufacturers (:CAAM), sales in China will increase 9% in 2012. Nissan occupies a leading market share in China with a record 21.9% hike in sales to 1.25 million vehicles.
However, Nissan faces fierce competition from companies including General Motors Company (GM), Ford Motor Co. (F), Honda Motor Co. (HMC) and Volkswagen AG (VLKAY) in China.These automakers are also expanding their global footprint in the emerging nations around the world. General Motors plans for a new greenfield facility in the central city of Wuhan, China, while Ford is mulling on setting up a plant in Hangzhou near Shanghai.
Nissan is the sixth largest automaker in the world. The company along with its subsidiaries engages in the production and sale of automotive products, industrial machinery and marine equipment, primarily in Japan, North America, and Europe. The company offers passenger cars, trucks, buses, forklifts, light commercial vehicles, power trains and parts, as well as sales financing activities.
Currently, Nissan retains a Zacks #1 Rank, which translates into a short-term (1 to 3 months) Strong Buy rating. We have a long-term (more than 6 months) “Outperform” recommendation on the stock.
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