Nissan's New Energy Starts to Accelerate

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Author｜Wang Lei, Liu Yajie

Fortunes change, and joint venture brands are starting to "OEM" for independent brands?

Japanese media Nikkei reported that Nissan's plant in Wuhan will produce electric vehicles for Dongfeng Motor Group before the end of this year.

The reason is also a common refrain, mainly due to the decline in Nissan's sales in China and the excess capacity. To improve the utilization rate of the plant, Nissan will lease the production line of the plant to Dongfeng Motor to revitalize idle assets.

However, as of now, both Nissan and Dongfeng Motor have not responded at the official level.

Behind this uncommon event, whether it is "OEM" or "leasing", it also reflects that joint venture brands represented by Nissan are not doing well in China.

01 Improving Plant Utilization

Nikkei reported that Nissan's Wuhan plant is preparing to produce Dongfeng Motor's sub-brand LANTU's new pure electric model - LANTU Zhiyin.

In the previously disclosed new car declaration list by the Ministry of Industry and Information Technology, it can also be seen that the production address of LANTU Zhiyin is displayed as "No. 8 Yunfeng Avenue, Junshan Street, Wuhan Economic and Technological Development Zone, Hubei Province."

And this address is where Dongfeng Nissan's Wuhan Yunfeng plant is located.

This plant has been producing Nissan-branded passenger cars, namely the Nissan pure electric models ARIYA and X-Trail, but due to Nissan's sluggish sales, the operating rate is not high.

By producing Dongfeng Motor's models, not only can the operating rate be increased, fixed costs can be reduced, but also the plant's operating efficiency can be improved.

Although the Wuhan Yunfeng plant has an annual production capacity of 260,000 vehicles, the price of ARIYA is on the high side, and sales are not good. In addition, the X-Trail is a traditional gasoline model, and sales have also started to decline. The wholesale sales of the three models last year were only 57,000 vehicles, with a capacity utilization rate of only 19%.

Although Nissan also plans to produce new models, it will take some time before they can be launched into the market, so it has decided to produce models for joint venture partners.

Coincidentally, as the "tenant," LANTU also has its own problems to solve.

This year is considered a big year for LANTU's products, and it is stretched thin in terms of production capacity. In addition to the recently launched LANTU FREE 318, LANTU's fourth model, "Zhiyin," is also about to be launched.

Facing the issue of insufficient production capacity, LANTU, backed by Dongfeng Motor, can naturally solve the problem by leveraging resources within the system.

Plus, the Yunfeng plant has experience in producing pure electric models ARIYA and X-Trail e-power, and the production line is relatively mature. Both sides have their needs met, and they immediately agreed.

In fact, a few days ago, many domestic media reported that "Nissan OEMs for Dongfeng Motor."

At that time, insiders refuted the rumor that "OEM" was untrue news, and that the Yunfeng plant belonged to Dongfeng Motor Group's passenger car expansion project. Dongfeng Nissan actually rented the plant to produce its models, and LANTU also adopted a similar model.

If this statement is true, then indeed there is no such thing as Nissan "OEM" Dongfeng Motor.

However, public information shows that although the Yunfeng plant project is named the Dongfeng Motor Group Co., Ltd. passenger car expansion project, it is a factory built by Dongfeng Motor Corporation using advanced technologies such as digitization and intelligence. However, when building the factory, the total investment reached 9.851 billion yuan (including 228.99 million US dollars in foreign exchange), and all funds came from corporate self-financing, with Dongfeng Motor Corporation only owning 66.86% of the shares at that time.

Moreover, in later promotional materials, it has always been promoted as Dongfeng Nissan's new generation factory. It is not difficult to guess that this factory was probably built in the name of Dongfeng Motor and holds a controlling stake, but Nissan Motor also has a presence behind it.

On one side is the popular "OEM theory" among onlookers, and on the other side is the "leasing theory" mentioned by officials.

But regardless of the production method, it implies a serious overcapacity problem for Nissan in China.

According to information disclosed on Dongfeng Nissan's official website, its production bases located in Guangzhou, Xiangyang, Zhengzhou, Dalian, Changzhou, and Wuhan have an annual production capacity of 1.6 million vehicles. However, according to the production and sales report released by Dongfeng Motor Group, Dongfeng Nissan's annual production in 2023 was 737,100 vehicles, with a capacity utilization rate of only 46.07%.

Therefore, how to deal with idle capacity has become a top priority for Dongfeng Nissan.

Moreover, the model of revitalizing idle production lines of joint venture brands while promoting the group's independent new energy brands is not the first case in the industry.

Previously, GAC FCA's Guangzhou plant was taken over by GAC AION and transformed into its second plant. GAC AION also took over GAC Mitsubishi and used the GAC Mitsubishi plant to achieve production expansion.

With the continuous advancement of the new energy era, it is highly likely that the situation of using new energy brands to revitalize idle joint venture production lines will continue to occur.

02 Sales Decline, Betting on New Energy

Behind the idle capacity is the gradual decline in sales. According to public data, Nissan's sales in China have declined for five consecutive years, falling from 1.5469 million vehicles in 2019 to 793,800 vehicles in 2023, a year-on-year decline of 24%, far exceeding the decline of Toyota and Honda.

Last year, Dongfeng Nissan's sales also declined by 21.53% year-on-year to 723,100 vehicles. This year, the downward trend has not reversed.

From January to May, Nissan's cumulative sales in China were 286,000 units, down 1.01% year-on-year. Dongfeng Nissan has repeatedly fallen out of the top ten automakers' sales list released by the China Passenger Car Association. During the same period, Dongfeng Nissan's production was 268,200 vehicles, down nearly 6% year-on-year, accounting for only 16.76% of its annual capacity.

The consequences of plummeting sales and low capacity utilization are layoffs, plant closures, and production cuts.

Nissan recently announced that it will close its passenger car plant in Changzhou, Jiangsu Province, and at the same time, it has decided to cut about 10% of its production capacity in China.

Coincidentally, the Changzhou plant has an annual production capacity of about 130,000 vehicles, accounting for about 10% of Nissan's total production in China. Its production work will be transferred to other Dongfeng Nissan plants.

The Changzhou plant was acquired by Dongfeng Nissan from Zhengzhou Nissan in 2018. It is Nissan's newest plant in China and also a Dongfeng Nissan passenger car production base. With a total investment of about 1.4 billion yuan, it is fully managed by Dongfeng Nissan, covering an area of 550,000 square meters, and officially put into production in November 2020.

Nissan Motor said that closing the Changzhou plant is to optimize production and is part of a strategic adjustment to address market challenges.

Insiders revealed that after the plant closure, most laid-off employees will receive at least N+1 compensation, and a small number of senior executives will be transferred to other bases or resign voluntarily. The Qashqai model previously produced at the Changzhou plant will also be transferred to the Dalian plant for production.

Originally built to further expand sales, the Changzhou plant has now become Nissan's first passenger car plant to close in China, with less than four years of operation. The fate of the Changzhou plant being shut down is also a microcosm of the continuous decline in sales and overcapacity of Japanese cars in China.

To save themselves, these brands are also offering steep discounts. For example, the Nissan Sylphy, which has a price of 108,600 yuan, has a discounted bare car price of only 80,000 yuan; the Guangqi Honda Accord priced at 179,800-228,800 yuan and the Dongfeng Honda CR-V priced at 185,900-263,900 yuan both have discounts of 60,000 yuan, and the FAW Toyota pure electric model bZ4X has a discount of 70,000 yuan.

But even with discounted promotions, sales are not satisfactory. From January to May this year, Toyota's sales decreased by 10% to 630,000 vehicles, while Honda fell by 17% to 340,000 vehicles.

At one time, Japanese cars were a hot commodity in the Chinese automotive market. Over the past decade, giants like Honda and Nissan have continuously increased their investment and expanded their production capacity in China. However, under the drive of the electrification trend, the advantages of Japanese cars have been constantly weakening.

From January to May this year, the market share of Japanese automakers has dropped from 23.1% in 2020 to 12.1%, while the market share of Chinese automakers has increased from 38.4% in 2020 to 61.3%.

Some Japanese automakers have also had the mindset of "withdraw if they can't compete." Last October, Mitsubishi Motors chose to directly withdraw from the Chinese market.

Optimistically, Nissan plans to change its business strategy and launch models such as the pure electric SUV "ARIYA" in the Chinese market, but the results are obviously not satisfactory.

Not long ago, Dongfeng Nissan also announced the "New Endeavor 100" action plan, planning to invest over 10 billion yuan in research and development in the next three years, increasing the number of R&D personnel from the current 1,600 to 4,000, and launching 7 brand-new new energy products in China by the end of 2026.

The new energy era is the general trend, and Nissan has already taken action. As for the effect, we will leave it to time.