August 20, 2018 / 1:04 PM / a month ago

UPDATE 1-Nissan to boost China production capacity by 40 pct, source says

(Adds background on Nissan's expansion plans for China)

By Norihiko Shirouzu

BEIJING, Aug 20 (Reuters) - Japan's Nissan Motor Co plans to invest about $900 million to boost vehicle-making capacity in China by 40 percent by 2021 - part of a 60 billion yuan ($8.73 billion) strategy to become a top three player in the world’s largest auto market.

Nissan and its Chinese joint-venture partner Dongfeng Group intend to invest roughly $900 million for the envisioned manufacturing capacity expansion over the next few years, according to a person close to the plan. That would boost Nissan's vehicle production capacity in China to as many as 2.1 million vehicles a year.

The investment is part of a previously disclosed multiyear plan to expand Nissan's sales in China.

China's auto market has been dominated by General Motors Co and Volkswagen AG for nearly two decades, with each selling 4 million vehicles last year.

Nissan, along with Toyota Motor Corp, Ford Motor Co , and Honda Motor Co, lag far behind, each selling 1 million-plus vehicles a year. Nissan wants to break out of this second tier to become a top-3 China automaker, Nissan China leaders have said.

Nissan sold 1.5 million vehicles last year. Its goal is to sell up to 2.6 million vehicles a year by 2022, said the source, who declined to be named because he is not authorized to speak to reporters about the expansion.

Nissan in February outlined a five-year plan, dubbed “Triple One,” to increase its market share in China by focusing on electric cars and the Venucia, a no-frills local Nissan brand in China - two market segments expected to see a surge in demand. It also aims to boost sales of light commercial vans and trucks.

Nissan and Dongfeng would use two existing assembly plants to produce Nissan brand passenger cars and construct a new plant in Wuhan where state-owned Dongfeng is headquartered.

Nissan, part of the Renault-Nissan alliance, plans to use the added capacity to produce both electric vehicles and gasoline-fueled cars for the Nissan brand and its China-only Venucia brand.

As part of its expansion, Nissan and Dongfeng are seeking approval from China’s regulators for a new assembly plant in Wuhan. If approved, the facility would have capacity to be able to produce about 300,000 vehicles a year.

Rival Toyota plans to boost its China capacity over the next few years by 240,000 vehicles a year, or by about 20 percent, from its current capacity of 1.16 million vehicles a year. ($1 = 6.8740 Chinese yuan renminbi) (Reporting By Norihiko Shirouzu; Editing by Jeffrey Benkoe)

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