"China is Nissan's New Frontier" - Purchases 50% Stake in China's No. 2 Auto Company

BEIJING September 19, 2002; Nissan Motor Co. said today it would invest 8.55 billion yuan ($1.03 billion) to take a 50% stake in an automobile-manufacturing joint venture with Dongfeng Motor Group Corp., China's second-largest auto maker.

The new company, to be called Dongfeng Motor Co., encompasses the production of Dongfeng's buses, trucks and commercial vehicles as well as a full range of Nissan passenger automobiles.

"Together, Nissan and Dongfeng aim to create a globally competitive commercial vehicle and passenger car manufacturer with a target of 550,000 unit sales by 2006," the companies said in a joint statement.

"In addition, Nissan will dedicate between 20 billion yen ($164.3 million) to 30 billion yen ($246.4 million) until 2006 in capital expenditure for specific Chinese product development," the statement said.

The Nissan-branded cars will be produced at Dongfeng's existing facilities at Xiangfan, Hubei province and Guangzhou, Guangdong province. The investment from Dongfeng wasn't disclosed.

The announcement, some details of which had been previously issued, marks Nissan's attempt to increase its share of China's rapidly-growing automobile market.

Of the joint venture's sales target of 550,000 units annually by 2006, 220,000 units are expected to be passenger cars and the remainder commercial vehicles.

Among Nissan's rivals, Honda Motor Co. is Japan's front-runner in car production in China. It started manufacturing autos there targeting Chinese consumers in 1999 and expects to have an annual capacity of 120,000 passenger cars by March 2003 at its production joint venture with Guangzhou Auto Group Corp.

Toyota Motor Corp. announced last month that it and China's FAW Group Corp. will team up in joint production of various passenger cars, targeting annual sales and production of 300,000 to 400,000 vehicles in China by 2010.

"China is Nissan's new frontier," said Nissan President and Chief Executive Carlos Ghosn in the statement.

The current plans for the Nissan-Dongfeng joint venture call for the introduction by 2006 of six locally-produced Nissan passenger models, in addition to the currently available Bluebird model sedan.

In 2003, production of the Sunny model passenger car will begin at the new Dongfeng Motor joint venture.

"The partners envision Dongfeng Motor to become a globally competitive auto maker with a production capacity of 900,000 units within ten years' time, playing a leading role in the globalization of the Chinese automotive industry and in the development of the Chinese market," the statement said.