New Nissan plant boosts output capacity in China

[September 20, 2010]  SHANGHAI (AP) -- Japanese automaker Nissan Motor Co. inaugurated a new factory Monday in the central Chinese city of Zhengzhou, part of an expansion that will nearly double its production capacity in the world's biggest vehicle market by 2012.

The new 1 billion yuan ($148 million) Zhengzhou Nissan Co. factory will help extend the company's reach into the inland Chinese markets that are beginning to drive growth as newly affluent families buy their first cars and current car owners upgrade to higher quality vehicles.

New investments and plant expansions will boost Nissan's annual capacity in China to 1.2 million vehicles by 2012, up from the current 670,000, Nissan's CEO Carlos Ghosn said.

"This plant is a tangible symbol of our growth strategy and the demanding goals we have set in China," Nissan's chief executive Carlos Ghosn said in written statement.

In April, Ghosn had said the company was aiming for capacity of 900,000 vehicles a year by 2012.

The increase appears to reflect growing confidence in China's market, where sales of passenger cars rose 18 percent in August from a year earlier. Dealers report especially strong demand for sport utility vehicles and imported models.

The factory inaugurated Monday will make two sport utility vehicle models, the X-Trail and Qashqai, which are now produced by a Nissan joint venture plant with state-owned Dongfeng Motor Co. plant in southern China's Guangdong province.

Zhengzhou Nissan, founded in 1993, became an affiliate of Dongfeng Motor in 2003.

Zhengzhou, a city of more than 7 million, is among many inland cities that are benefiting from a push by various industries to expand into the vast Chinese hinterland.

Foxconn, the world's largest contract maker of electronics and a supplier to Apple Inc., Sony Corp., Dell Inc., Nokia Corp. and Hewlett-Packard Co., is boosting production in the area as it seeks to lower labor costs and evade the wave of labor unrest sweeping through factories in more affluent regions.

Authorities in regions like Zhengzhou have welcomed such investments, both for the land revenues and taxes they bring in and as a way of helping to absorb the legions of surplus farm workers shifting from rural areas into China's cities.

The shift by major manufacturers away from coastal areas in the east and south is also expected to encourage the growth of more internationally competitive industries in inland China.

"Because we expect to build cars with a high level of localization, production here will promote the growth of local suppliers in the Zhengzhou area, contributing to a more robust automotive industry in this region," Ghosn said.

Output at two Zhengzhou Nissan factories will rise to 200,000 vehicles a year from the current 60,000 vehicles, the company said. By 2012, capacity will rise to 240,000, the company said.

[Associated Press; By ELAINE KURTENBACH]

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