Nissan to Start Producing EVs for Dongfeng Motor by Year-End: Report
TOKYO (Reuters) – Nissan Motor will begin producing electric vehicles (EVs) for its Chinese joint-venture partner Dongfeng Motor at its Wuhan factory by the end of this year, according to Nikkei. This move highlights the pressure on Nissan's operations in China.
Why is This Happening?
By producing EVs for Dongfeng, Nissan aims to reduce fixed costs and increase the operating rate of the factory. Fixed costs include expenses that do not change with the level of goods or services produced by a business, such as rent and salaries. The factory's operating rate refers to how much of its production capacity is being used.
Nissan's Wuhan factory has an annual production capacity of 260,000 vehicles but has been struggling with slumping sales. To combat this, they will now start producing Dongfeng's new Zhiyin EV, part of its Voyah brand.
Nissan in China
Nissan, Japan's third-biggest automaker, already manufactures the Ariya EV and the X-Trail SUV at the Wuhan plant through its joint venture with Dongfeng. A joint venture is a business arrangement where two or more companies agree to pool their resources for a specific task, such as production or marketing.
Nissan operates eight factories in China through its partnership with Dongfeng. However, production was halted at one of these plants last week. Despite this, Nissan remains committed to the Chinese auto market, which is the world’s largest.
Challenges in the Auto Market
Both Nissan and rival Japanese automaker Honda Motor are facing tough competition in China. Consumers are increasingly opting for affordable, software-loaded cars produced by various local brands like BYD. These cars offer advanced features at a lower price, making them attractive to buyers.
The rapid growth of EVs by Chinese car makers not only challenges Nissan and other Japanese automakers in China but also poses a threat in other regions such as Southeast Asia and Europe. For example, Chinese brands are expanding their market share in countries like Thailand and Germany, making it tougher for foreign brands to compete.
Takeaway
- Nissan will start producing electric vehicles for Dongfeng Motor by year-end.
- This move is aimed at reducing costs and utilizing the Wuhan factory more efficiently.
- Nissan will produce Dongfeng’s new Zhiyin EV under the Voyah brand.
- Competition from local Chinese brands like BYD is increasing.
Contact Efforts
Both Nissan and Dongfeng did not immediately respond to requests for comments regarding this new strategy.
This marks a significant transition for Nissan as it continues to navigate the competitive and evolving auto market in China and beyond.
