September 19, 2002
NISSAN AND DONGFENG TO ESTABLISH
Nissan to take 50 percent equity stake in Dongfeng's core operations
Beijing, September 19 - Nissan Motor Co., Ltd. (Nissan) and DongFeng Motor Corporation (Dongfeng) will sign today a comprehensive strategic partnership in China. Each party will own a 50 percent equity stake in a new company which will incorporate Dongfeng's buses, trucks and commercial vehicles, in addition to a full range of Nissan passenger vehicles.
Through the venture, Dongfeng and Nissan will jointly establish the first Sino-foreign full-line truck, light commercial vehicle and passenger car manufacturer. The newly constituted company will be named Dongfeng Motor Co., Ltd. ("Dongfeng Motor").
Together, Nissan and Dongfeng aim to create a globally competitive commercial vehicle and passenger car manufacturer with a target of 550,000 unit sales by 2006.
Dongfeng, one of China's top three automotive companies, was established in 1969 by the Chinese government. Annual sales in 2001 totaled 265,000 units. Of this total, more than 194,000 were commercial vehicles including buses and heavy-, medium- and light-duty trucks. Today, 50 percent of all vehicles sold in China are commercial vehicles excluding buses, in which Dongfeng holds a 17 percent market share.
Dongfeng's sales performance reached 190,900 units for the first half of 2002, up 44.6 percent from the same period in 2001. Operating profit was RMB2.69 billion, up 99.42 percent.
Working as partners, Nissan will offer the new "Dongfeng Motor" company its global brand power, technological capabilities, expanded product range, and its unique multi-functional management expertise gained through its own revival process. It will directly invest RMB8.55 billion (USD 1.03 billion; JPY120.4 billion)* in the new company in order to acquire a 50 percent equity stake. In addition, Nissan will dedicate between JPY 20-30 billion until 2006 in capital expenditure for specific Chinese product development.
Dongfeng will bring to the new "Dongfeng Motor" its national brand recognition, a significant track record in domestic commercial vehicle sales, broad and established manufacturing facilities, dedicated human resources, and an extended distribution network in the growing Chinese automotive market.
"We are extremely pleased to have Nissan become Dongfeng's long-term comprehensive partner," said Miao Wei, Chief Executive Officer of Dongfeng. "Through the successful production over the past two years of Nissan Bluebird sedans by Fengshen, our group company, we have carefully nurtured our relationship."
"We are now eager to enter a deeper, more comprehensive agreement. We believe the partnership with Nissan will be vital for the future of Dongfeng Motor as a truly competitive, full-line automotive manufacturer," he said.
"China is Nissan's new frontier. We are committed to developing Nissan's presence on the Chinese market through our association with Dongfeng," said Nissan President & CEO Carlos Ghosn.
"This unique and comprehensive partnership between a leading Japanese company and one of China's premiere state enterprises will bring real benefits to Chinese consumers," he said. "Guided by global benchmarks, we will build on and expand Dongfeng Motor's already profitable commercial and passenger vehicle businesses by promoting the adoption of best management practices and by providing a strong performance orientation for the benefit of all stakeholders."
Dongfeng's automotive business is primarily based on the production and sale of commercial vehicles, which have made 'Dongfeng' a strong brand name in China. Nissan's expertise will help the new company add to its operations a full lineup of light commercial vehicles and passenger cars, providing further impetus to the company's profitability and growth over the medium and long term.
Nissan, established in 1933, first arrived in China in 1972 with the sale of the Cedric sedan. Today the company offers the Cefiro, Sunny and Bluebird passenger cars, the "Pickup" truck, and the X-Trail SUV. Aeolus Automobile Co, Ltd. ("Fengshen"), Dongfeng's subsidiary in which Taiwan's Yulon Motor Co., Ltd. also holds a stake, produces the Nissan Bluebird locally. Zhengzhou Nissan Automobile Co., Ltd. produces the "Pickup" truck in a separate venture. In 2001 Nissan sold 34,000 vehicles in China.
The partnership between Nissan and Dongfeng is the first of such a scale involving a Chinese automotive company and a foreign partner.
To support the profitable growth of the new company, the agreement calls for Nissan to provide management expertise in numerous fields: product planning, purchasing, plant productivity, logistics, quality control, brand management, marketing and sales, distribution network, and financing. Moreover, the partnership will create a new passenger vehicle R&D center in addition to reinforcing Dongfeng's existing R&D resources in commercial vehicles.
Of the 550,000 annual unit sales targeted by the new "Dongfeng Motor" in 2006, 330,000 will be commercial vehicles. Trucks and buses will be produced in existing Dongfeng Motor plants such in Shiyan and Xiangfan and will carry the Dongfeng badge.
Another 220,000 will be passenger vehicles ranging from economy to family and luxury in segments covering subcompacts to mid-size sedans and MPVs. All passenger cars manufactured by the new company will be Nissan-branded and produced at existing Dongfeng Motor production facilities in Xiangfan and Guangzhou Huadu.
Current plans call for introduction of 6 additional locally-produced Nissan passenger models beyond the popular Bluebird by 2006. In 2003, production of the Sunny will start at the new "Dongfeng Motor."
The partners envision "Dongfeng Motor" to become a globally competitive automaker with a production capacity of 900,000 units within ten years' time, playing a leading role in the globalization of the Chinese automotive industry and in the development of the Chinese market.
This year marks the 30th anniversary of Nissan's presence in China. This agreement will support Nissan's growing presence in China and will contribute to the NISSAN 180 commitment to sell 1 million additional cars globally by the end of FY2004.
The partnership between Dongfeng and Nissan represents a major step forward for Dongfeng to actively participate in global competition and face the challenges anticipated with China's entry in WTO. It will be integral in the growth of Dongfeng to new heights in strength and scale and in the enhancement of its global competitiveness and contribution to China's auto industry.
Dongfeng and Nissan will jointly work next on a deployment plan toward establishment of the company as procedures for filing with the government immediately. The partnership between Dongfeng and Nissan is strongly supported by the central Chinese government, relevant government ministries, the Hubei Provincial Government, the Guangdong Provincial Government, and the relevant local government authorities.
Reference*: Currencies have been translated into yen and dollar based on the exchange rates as of September 13, 2002 for the convenience of the reader. (1 RMB per 14.08 JPY; 1RMB per USD 0.12; 1USD per 121.75 yen)