Dongfeng, Nissan China JV sets growth goals

A venture between China's Dongfeng and Japan's Nissan Motor outlined ambitious plans on Wednesday for expansion in the world's fastest-growing auto market, including plans to build a new commercial vehicle plant.

After doubling sales in the previous five years, the joint venture, Dongfeng Motor Co Ltd, expects to sell 1 million vehicles annually by 2012, up from 610,000 last year, its president, Kimiyasu Nakamura, told reporters.

"We would like to reach this 1 million units within this 5-year period," said Nakamura.

The company, which brings together China's third-largest automaker, Dongfeng Motor Group Co, with Japan's No 3, will build a new 1 billion yuan ($144 million) plant to underpin its lagging commercial vehicle unit, Nakamura told reporters.

"We have competitive advantages in passenger vehicles in China, but not in commercial ones," said Nakamura.

The factory will begin production in 2010 in the Central China's city of Zhenzhou, augmenting an existing plant. The new plant will increase annual capcity by 120,000 vehicles a year, he said.

The plant will help Dongfeng reach its goal of doubling the growth rate of commercial vehicle exports to 10 percent a year by 2012. The company did not say how many commercial vehicles it now exports.

The company is also in talks with Volvo, the world No 2 truck maker, about cooperating on the research and development of commercial vehicles, said Xu Ping, the JV's chairman.

The aim was to promote Dongfeng's brand in China, Xu said, who did not elaborate on the talks with Volvo.

But the venture, like automakers around the world, has been hit by the rising cost of materials.

"Rising raw materials costs are the biggest headache for the company," Nakamura said. "We thought the problem as a temporary one in the past, but it has turned into a structural problem."

Costs would continue to rise into 2009 and 2010, he said.

However, those worries did not dent its optimism for the fast growing domestic market. Nakamura said his company planned to launch 15 new commercial and passenger vehicle models in the next five years.

By 2012, the JV is projecting annual sales of 100 billion yuan ($14.39 billion), up from 59.32 billion yuan ($8.54 billion) last year.

The joint venture sold 101,769 cars in the first four months of 2008, 23.2 percent more than a year earlier.

Dongfeng also has joint ventures with PSA Peugeot-Citroen and Honda Motor.

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