Nissan venture in China raises target for sales

Nissan Motor Co.'s passenger-car and truck joint venture with China's Dongfeng Motor Group Co. increased its annual sales goal to 1.5 million vehicles in that country from one million by 2012, after reaching the one-million mark two years early.

The business hit that mark in the January-October period this year, said Kimiyasu Nakamura, chief executive of Dongfeng Motor Co., a joint manufacturing and sales venture between Nissan and Dongfeng Motor Group that produces Nissan-branded and Dongfeng-branded vehicles. The Nissan-Dongfeng joint venture is set to sell about 1.2 million vehicles this year, up from 925,000 vehicles in 2009, Mr. Nakamura told a news conference in Beijing.

The executive said demand for the joint venture's vehicles is expanding rapidly in China partly because of the company's focus on small fuel-efficient cars, whose sales China's central government encouraged over the past two years with sales incentives and other policy support.

It remains unclear, however, whether such official policy support for private car sales is going to be extended next year and beyond, he said.

Still, with or without sales incentives and other stimulus measures, China's auto demand is likely to expand steadily over the medium term, he said.

"It's really up to the continued strength of China's overall vehicle demand" whether the Chinese-Japanese joint venture is going to be able to meet its sales objective, Mr. Nakamura said.

According to his estimate, overall vehicle sales in China this year are likely to edge toward 18 million vehicles, up from about 13.5 million vehicles in 2009.

Mr. Nakamura declined to say how strong the expected longer-term growth may be, but according to some industry projections in recent weeks, overall demand might rise to 20 million vehicles in 2011. Some say China vehicle sales could hit 40 million by 2020, though many analysts say that may be overly optimistic.

The Nissan-Dongfeng joint venture's chief executive said his company is preparing to deal with two major trends in the China market: expanding demand for cars from consumers who are replacing existing cars or adding second or third cars in more mature eastern markets such as Beijing and Shanghai, and a surge in car demand in the country's hinterland where 90% of customers are first-time buyers.

In Beijing, around 40% of people buying cars are either replacing existing cars or buying second or third vehicles, Mr. Nakamura said. In addition to focusing on such customers, Mr. Nakamura said the joint venture has begun zeroing in on the used-car business, as more big-city consumers sell their cars to buy new ones.

In addition, the Nissan-Dongfeng joint venture will also try to focus on new car demand in China's inland and western regions.

Although the development of those regions has lagged, consumer demand is surging in those markets as the government pours money into infrastructure-building projects.

Mr. Nakamura said China's inland and western regions have multiple sub-markets with more than 10 million consumers. "It's like having five Tokyos," he said, pointing to the promise of the country's underdeveloped western regions such as Sichuan province.