Nissan Motor Co., Japan's third- biggest carmaker, said it will suspend the second phase of its factory being built in the southern Indian city of Chennai until global demand for automobiles recovers.
"We didn't suspend because we do not believe in the potential of India's internal market or the capacity to export," Chief Executive Officer Carlos Ghosn said at the India Economic Summit organized by the World Economic Forum in New Delhi. Resumption will depend on when the decline in the world market stops, he said.
Nissan, which is building the plant in partnership with Renault SA, said in June that the Chennai factory is key to its European operations, as building cars in India will be as much as 5 percent cheaper than in Europe even after logistics costs and duties. The first phase of the factory will start operations in early 2010, Ghosn said. Chief Operating Officer Toshiyuki Shiga said Oct. 21 that global car demand remains "fragile."
Nissan will make a new entry-level car for the European and Indian markets at the Chennai factory, with plans to export about 110,000 units in the year ending March 2011, Executive Vice President Colin Dodge had said on June 4.
The Japanese company, which proposes to introduce nine models in India by 2012, is aiming for a 5.7 percent share of the passenger vehicle market by that year in the country, where incomes have doubled in the past eight years. Ghosn today said 2010 will be a tough year for Europe and Japan, while China and India will play a crucial role in world economic recovery.
India Investment
Nissan's affiliate Renault temporarily suspended its India investment and will resume when the economy and auto sales revive, Dodge said in June. The two companies originally planned to spend 45 billion rupees ($964 million) in Chennai by 2015.
Chennai, formerly known as Madras, is home to factories operated by Ford, Mitsubishi Motors Corp., Bayerische Motoren Werke AG and Hyundai Motor Co.
Renault now sells the Logan sedan in India with partner Mahindra & Mahindra Ltd. The joint venture's sales plunged 48.2 percent to 13,423 units in the fiscal year ended March 31, according to the Society of Indian Automobile Manufacturers.
Nissan and Renault have also teamed up with Bajaj Auto Ltd., India's second-largest motorcycle maker, to sell a $2,500 car by 2011 to challenge Tata Motors Ltd.'s Nano, the world's cheapest car.
