BEIJING -- Nissan, Japan's No. 2 automaker, will start making Infiniti cars at a 2 billion yuan ($315 million) plant in China from 2014 as it moves to challenge the dominance of German rivals in the world's largest auto market.
Chinese-made Infiniti cars would put Nissan on a more level playing field with Audi, Mercedes and BMW, which have been making cars in China for years, industry observers say. Imported Infiniti cars have been available in China since 2007.
Nissan sold about 19,000 Infiniti cars in China in the last fiscal year that ended in March, a fraction of the more than 300,000 cars market leader Audi delivered in the whole of 2011.
"It's a necessary step if Infiniti wants a bigger share of the Chinese market," said Jenny Gu, a manager with industry consultancy LMC Automotive.
"Local production would provide the volume it needs to catch up with the German brands and help to offset a rising yen" that makes cars imported from Japan more expensive, Gu said.
In a statement, Nissan said two Infiniti models - which have yet to be named - would be produced at a factory jointly operated with Dongfeng Motor Group, that currently makes the Nissan Teana midsize and Murano crossover models.
The facility in Xiangyang city in central China would have an initial capacity of 130,000 vehicles, rising to 250,000 eventually, it added.
"The localization of Infiniti at our Xiangyang plant is a significant milestone for us," said Kimiyasu Nakamura, president of Dongfeng Motor Co, Nissan's joint venture with Dongfeng.
"It proves that we are fully capable of producing luxury vehicles of the highest quality standards here in China, at the same level of quality as the Tochigi plant, its mother plant, in Japan."
Earlier this month, Infiniti relocated its global headquarters from Yokohama, Japan, to Hong Kong, a gateway to mainland China.
Nissan outsold Toyota to become the top Japanese light-vehicle brand in China last year for the first time, according to research firm LMC Automotive.
The Infiniti plant would place Nissan further ahead of Toyota and Honda in China's luxury car segment, which Daimler CEO Dieter Zetsche said could continue to grow 15-20 percent in 2012 after years of breakneck expansion.
Other luxury carmakers, such as General Motors and Honda, are also playing catch-up, hoping to grab a bigger share of the Chinese market.
GM CEO Dan Akerson expects Cadillac's China sales to match U.S. sales levels by 2015 or 2016.
French carmaker PSA/Peugeot-Citroen plans to introduce its Citroen DS luxury sub-brand to China from June 28, with an annual volume target of 200,000 vehicles within four years.
Nissan's mid-term growth plan targets sales of 500,000 Infiniti vehicles globally by 2016, and the company has said China would account for a large portion of that growth.
Most Infiniti models are made in Japan. To help achieve its goal by 2016 and avoid foreign exchange risks, Nissan also plans to localize Infiniti production in the United States and Europe.
Nissan sold about 146,000 Infiniti vehicles globally in the last fiscal year.
Source: Reuters and Automotive News Europe