Nissan Dilutes the Indigenous Strategy of Chinese OEMs to Promote Infiniti Domestically

The introduction of high-end brands to ensure profit margins has long been one of the industry’s recognized joint venture business strategies. While Nissan continues to push up the market position of the joint venture company, its high-end brand Infiniti’s domestic plans may have already been put on the agenda. Every reporter Wu Yushi sent from Beijing on July 28th to lay the groundbreaking ceremony for Dongfeng Nissan Huadu Engine Factory's capacity expansion project. Ren Feng, Vice President of Dongfeng Co., Ltd. and Ren Yong Nissan deputy general manager disclosed that Dongfeng Nissan's new medium-term business plan for 2011 to 2015 was successful. After the implementation, Dongfeng Nissan will be allowed to jointly develop a global product with the Renault-Nissan Alliance for the first time.

From the expansion of production of Dongfeng Nissan engines to the acceleration of localized supply of key components, and to the development of Renault-Nissan's global vehicle development system, Nissan is also aiming to weaken its “generation” while constantly pushing up the market position of the joint venture. The label of “factory” and the secret of Nissan’s China strategy are also leveraging on the strengths to comprehensively advance the localization strategy. The domestically produced plan of its high-end brand Infiniti has already been put on the agenda.

Incorporating global model development, multinational corporations consider the Chinese market as a strategic market in the global market, and joint ventures that want to occupy the mainstream of the market are no longer just introducing the localization of vehicles to transform, but focus on To establish an R&D center in China and turn China into a manufacturing base that integrates global development and production into global markets.

In the new round of China's production capacity deployment and investment boom, Nissan’s moves are rapid. According to Ren Yong, in the current Renault-Nissan alliance, the level of technological research and development is divided into multiple levels.

"Dongfeng Nissan is currently at Rank C level, which means it can participate in the improvement and development of regional products." Ren Yong said. In the new mid-term business plan of Dongfeng Nissan, the level of technological development of Dongfeng Nissan will reach Rank A in the future, which means that Dongfeng Nissan can participate in the development of the Renault-Nissan Alliance global model.

"This is an all-round development capability including platform technology." Ren Yong emphasized the significance of R&D capability enhancement.

The upgrading of Dongfeng Nissan's technological R&D standards began with the new engine factory capacity expansion project. It is understood that Dongfeng Motor Company has already proposed that it is necessary to further enhance local R&D capabilities. The joint venture’s Chinese R&D strength must be strengthened.

The relevant personage of Dongfeng stated: "If the joint venture brand is doing poorly in this area (local R&D capability), and if the consciousness is slow, it will fall into the next round of deeper crisis."

Dongfeng Nissan general manager Song Yuanshi Ming introduced that the technology to be introduced at the new engine plant will be mainly based on forging technology. "For the production of engines, forging technology is very important."

Ren Yong stated that "one of the purposes of the expansion of the engine plant is to achieve complete localization of the powertrain. The engine block will be produced entirely by us from the beginning of the embryo."

He also said that due to the introduction of new forging processes, the proportion of domestic production of new products will also increase. In addition, Dongfeng Nissan will establish an engine second plant in Zhengzhou in 2013 and continue to expand production capacity. In the second half of this year, there will be more than a dozen parts and components factories settled in Huadu; by 2013, Dongfeng Nissan will build a manual gearbox factory in Huadu.

Relying on local new brands before participating in global vehicle development, Dongfeng Nissan’s first project independently developed is its own brand, Qi Chen.

Matsumoto Shiming said that by 2015 Nissan’s sales volume will increase by 1 million to 2.3 million units, and the sales of passenger cars will also have to double.

“To achieve this goal, we first rely on the Qichen brand. In the first half of next year, we will launch more than 100 sales networks in China to sell the first models of Qichen; by 2015, 250 Qichen franchise stores will be built, and sales will be 5 Qi Chen products." Song Yuan Shi Ming has great expectations for Kai Chen.

Dongfeng Nissan has built a separate network for Qichen and sells it with Japanese products. "Our goal is to scale Qichen, so we will invest so much energy and resources to do it." Ren Yong said. "The independent establishment of channels is our Chinese side's opinion. The Japanese side also expressed its support."

In addition, according to another key point of research and development, new energy products, Song Yuanming explained that “The Qichen brand will introduce electric vehicles. Nissan and Nissan will apply the latest energy-saving technologies to Qichen products.”

Infiniti's domestic outlook is optimistic. In Dongfeng Nissan's model product structure, the vacancy of high-end vehicles is still to be made up. If nothing else, Nissan’s high-end brand Infiniti’s domestic projects will still be affected by Dongfeng Nissan.

It is reported that Infiniti’s domestic issues have long been discussed by the Chinese and Japanese sides and a general strategy has been formulated. According to the preliminary plan, Dongfeng and Nissan both hope to adopt a business model similar to that of FAW-VW Audi, establish a special business unit in China, and restructure the equity ratio. Among them, Nissan will transfer some of its 50% stake to Infiniti.

However, Infiniti (China) denied the news. Infineon (China) Marketing Department, responsible for marketing communications, said Ma Xueni, "At present, Infiniti's domestic issues, has not yet appeared on our agenda, the current domestic speculation about Infiniti made all kinds of speculation."

However, Nissan’s president Carlos Ghosn’s attitude was relatively positive.

“We are indeed discussing plans to produce Infiniti in China, but there is no final timetable.” Carlos Ghosn responded to the media’s ardent questions after releasing Dongfeng’s limited 2011-2015 mid-term business plan.

The introduction of high-end brands to ensure profit margins has long been one of the industry’s recognized joint venture business strategies. Volkswagen has Audi in China and Cadillac in General Motors. The brand effect and profitability of high-end brands are not negligible for joint ventures.

In this regard, Ren Yong said, “Dongfeng Nissan has always put profit margins at a very important position to consider.” He even surprisingly disclosed that “Dongfeng Nissan’s current domestic profit margin ranking is far higher than our sales rankings. ."

Xu Ping, chairman of Dongfeng Motor Corporation, also stated that “things are constantly advancing and changing, and it is not ruled out that Infiniti will be announced in the near future”.

Infiniti sales in China reached 11,000 in 2010. In the first half of 2011, despite the impact of the Japanese earthquake, Infiniti’s sales in China continued to increase by nearly 50% year-on-year.

The introduction of high-end brands to enhance brand image and profitability is one of the common business strategies of joint ventures. Regarding Infiniti’s domestic timing, Ren Yong half-jokingly replied: “Today we have announced so many good news, so don’t announce all the good news at once.”

This shows that Dongfeng Nissan is equally optimistic about Infiniti's domestic expectations.