#8 “Nissan's China Business” May, 2009

2008 Results

In 2008, DFL shifted to its new five-year business plan, "Plan13" in order to establish a firm position in China and strengthen its global competitive edge. The plan set the following three objectives: "Significant Growth (sales volume* of 1 million units and revenues of RMB 100 billion by 2012)", "Operational Enrichment (achieving first class in quality at all levels for product, sales & service and cost competitiveness)", and "Trusted Company (respecting stakeholders to be recognized as a 'Trusted Company')".

DFL sold 708,000 units* in 2008 (up 16% year-on-year), and exceeded the initial plan by over 28,000 units*. Market share was up 1.2 percentage points to 6.3% and was ranked sixth in the market. Exhibiting a wide range of products at various prices, Nissan strengthened the lineup of its passenger vehicles by introducing four new Nissan brand models (Qashqai in March, Livina C-Gear in April, Teana in June, and X-TRAIL in November). This was one factor that contributed to the increase in sales. Additionally, Teana received 18 awards, including China Car of the Year, and X-TRAIL won the SUV of The Year in 2008.

  • * Including Dongfeng brand large commercial vehicles

- Nissan Brand Passenger Vehicles Lineup: -

2009 Sales Target

Although China's GDP had been increasing at double-digit levels since 2003, 2008 saw only a 9.0% increase from the previous year (National Bureau of Statistics of China). Economic growth slowed, particularly after the global financial crisis worsened in the fall of 2008. While Nissan continues to achieve year-on-year double-digit sales increases in China, forecasted sales for FY2009 are 570,000 units (up 5% year-on-year), given the current economic situation. This forecast includes factors such as the contribution of new models launched in 2008, the capability to utilize DFL's advantages in the inland area and the benefit of government stimulus measures.

DFL Marketing Advantages in Inland Area

Due to the global recession, sales in the coastal area, where a number of exporting companies are based, had decreased since the fall of 2008. However, sales in populous China, such as the small and medium-sized cities in the inland area, remain steady. As many of DFL's sales outlets are situated in this area, the company will be able to maximize its market expansion.

According to "The World Motor Vehicle Statistics 2008" issued by the Japan Automobile Manufacturers Association, Inc., the number of vehicles per 1,000 people in mature markets is 800 units in the US and 600 units each in Japan and Europe. In China, the number is less than 50. Furthermore, the ratio is lower in the inland area compared to the coastal area. Therefore, having a strong sales network in the inland, where there is potential growth in demand, is one of DFL's long-term advantages.

Impact from the Government's Stimulus Measures

Various stimulus measures have been implemented by the Chinese government in 2009, which in turn should benefit the automotive industry and DFL. In January of 2009, the government introduced a preferential tax incentive where the purchase tax for vehicles, with engines up to 1.6 liters, were reduced from 10% to 5%. As this comprises nearly 66% of DFL's product lineup, including Tiida and the Livina series, the benefits gained from the tax break should be enormous.

Part 4: Sustainable Growth

Light Commercial Vehicles (LCV) Business Expansion

Nissan is the only Japanese automobile manufacturer to offer LCV in the Chinese market. Furthermore, the company will introduce over five new LCV models for the Chinese market by 2012. DFL is able to provide an extensive lineup through the Dongfeng and Nissan brands. In 2009, the NT400 Cabster (also known as Atlas F24 in Japan), a new compact truck, will be introduced from Nissan. In addition, a new LCV manufacturing plant is currently under construction and is scheduled to open in 2010.

Introduction of Electric Vehicles (EV)

Nissan signed a Memorandum of Understanding for a partnership with the Ministry of Industry and Information Technology of China (MIIT) for zero emission mobility (vehicles with zero CO2 emissions) on April 10, 2009. Nissan believes the EV is the solution for alternative energy vehicles and aims to be the global leader in zero emission mobility. Under the MOU, Nissan will introduce the EV in China in early 2011, prior to the global launch in 2012. The EV will be introduced initially in Japan and the US in 2010.

Environmental Efforts

Nissan has been strengthening its environmental efforts in order to become a "Trusted Company" in China. For example, installation rates for the fuel-efficient CVT (Continuously Variable Transmission) will be increased from 13% in 2007 to 50% by 2012. JATCO, one of Nissan's affiliate companies, will start CVT production in Guangzhou in 2009. In addition, Nissan introduced its innovative route-guidance navigation service and traffic information system known as "STAR WINGS". With the support of the Beijing Transportation Information Center, "STAR WINGS" is now available on the new Teana.

Part 5: Conclusion

Although the automobile market in China does not have a long history, it has grown tremendously and has the potential to grow even further. Given the large number of automobile manufacturers in the market, competition will continue to be fierce. While further increases in demand may not be expected for mature markets, success in China is essential for Nissan's sustainable growth. Nissan will actively introduce new models and advanced technologies in its efforts to achieve "Plan13". Please look forward to the continued growth of Nissan.

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