Nissan may localise production in China to gain larger market share, aims to take 10 per cent of luxury segment

Nissan, the Japanese automotive company, is aiming to increase worldwide sales of its Infiniti brand threefold by the year 2016. It is aiming to capture 10 per cent of luxury vehicle segment in China and give stiff competition to the segment leaders, namely Audi AG, Mercedes Benz and Daimler AG. On 22nd May, 2012, its Infiniti brand went on to become the first global car brand to establish headquarters in Hong Kong. However, with production to commence in 2014 only, it is being considered as a latecomer in the Chinese market. At present, the brand enjoys just 3 per cent of the market share of China's luxury vehicle segment.

According to Yale Zhang, Head, Automotive Foresight, a Shanghai-based consulting firm, the target set by the car maker looks difficult. He said that if the company wants to achieve the goal, it would have to "aggressively push localisation over the coming two to three years and aggressively price locally produced cars."

During the fiscal year ending on March 2012, Infiniti sold only 19,000 units in the Chinese market. The figure represents a small share of the 3,00,000 vehicles sold by Volkswagen Group's premium brand, Audi AG, in the year 2011. With almost all the models being made in Japan, Nissan is looking at fuelling its growth and hedging exchange rates. For this purpose, the company is planning to localise production in United States, China as well as countries in Europe. Leading car makers like Audi, Mercedes Benz and BMW have already localised production in China, world's largest automotive market. This move is a necessity since the country imposes 25 per cent excise duty on the vehicles that are brought as imports.

Along with its partner Dongfeng Motor Group, the Japanese auto major produces models under other brands in the country. On 22nd May 2012, it confirmed that two new models of Infiniti brand will be manufactured at Dongfeng factories. At the inauguration ceremony in Hong Kong, Chief Executive Officer (CEO) and President, Nissan, Carlos Ghosn said, "We know it's going to be a competition and it's going to be tough, but at the same time it's an open business with a lot of growth to come (in China)."

He commented, "We need to triple our market share in China." Adding further, he stated, "We are investing in order to reach 10 percent market share in each market." He said that the targeted market share determined the strategy for Infiniti, but refused to state how fast the brand is expects to attain it.

In the last fiscal, Nissan's global sales figures stood at 1,46,000 units under the Infiniti brand and the car maker is focussing on expanding the brand's volume by 50 per cent in China this year. This is in line with the aim of touching the sales figure of 5,00,000 units across the world by 2016.

According to Zhang, a continual increase in the number of high-end car buyers is a positive sign for Nissan-Infiniti. He said, "Today's premium segment is still dominated by some super-rich tycoons...but the good news is there will be more practical premium car buyers when more mid-class car owners upgrade their current sedans."