Gasgoo.com (Shanghai January 25) - Continuing appreciation of the yen is proving a tough pill for Japanese automakers to swallow, with GAC Group's Japanese new partner Mitsubishi Motors announcing that it would reduce Japanese production of spare parts and shift production to China. The decision, part of the company's 2011-2013 fiscal year business plan, makes it the third Japanese automaker after Toyota and Nissan to cut costs and move part of its business across the East China Sea. The company further announced that it would unveil a new "global compact" for the Chinese market.
According to Mitsubishi's current plans, the company plans to increase foreign production from 44% to 54% by 2013. The company also plans to decrease its purchasing costs, hoping to make savings of 90 billion yen ($1.09b). Increased purchases of foreign parts will help the company keep its losses caused from the yen high appreciation rates down.
Mitsubishi stressed that it will be placing its focus on China, Southeast Asia, Russia, Brazil and other emerging markets. The company hopes that Chinese sales of its upcoming 'global compact' will reach 280,000 units. According to the Guangzhou Daily, the new car is expected to be produced next March at Mitsubishi's third Thai factory outside of Bangkok. Domestic production plans via the automaker's joint venture with GAW Group may also be in the works.
@@Page@@With the yen having increased 10% over the dollar, Japanese manufacturers are facing decreasing profits from exports. Many analysts agree that foreign companies who previously had no interest in overseas manufacturing deciding to shift production to China will provide a good opportunity for domestic companies, as local investment is bound to increase dramatically.
Due to the current economic system revolving around the US dollar, joint CEO of Renault and Nissan Carlos Ghosn said that he plans to stop expansion of Japanese production to prevent further influence from exchange rate fluctuations. Nissan is currently in the middle of a strategic shift, with production of the March/Micra subcompact already entering China. "In terms of Nissan's global production development Chinese factories are becoming more and more important," said Ren Yong, vice president of Dongfeng Nissan. He went on to say that domestic development will aid China's manufacturing ability, while reducing overall costs. When asked about whether or not Nissan's high-end brands will also be produced in the country, Mr. Ren said that although future plans were still under discussion, making final decisions regarding Dongfeng Nissan's bringing in other products were only a matter of time.
According to GAW General Manager Zeng Qinghong, component costs constitute 70% to 80% of a vehicle's costs. As a result, Chinese companies may be able to make serious gains because of the rising yen.
