Tokyo, Sept. 18 (Bloomberg) -- Nissan Motor Co. will pay 8.55 billion yuan ($1.03 billion) for half of an automaker created with the main assets of China's second-largest vehicle maker, people familiar with the transaction said.
Nissan's transaction with Dongfeng Motor Corp. will allow Japan's third-largest automaker to bypass hurdles that have restricted existing auto ventures in China, such as making new models without government approval, the people said.
Carlos Ghosn, Nissan's president, will sign the Dongfeng accord tomorrow in Beijing, the Japanese carmaker said. Dongfeng will inject its assets as its investment into the new company, said company spokesman Wu Yuehua, declining to give more details.
"This is good news for Nissan,'' said Dai Nishiyama, who helps manage $22 billion at SG Yamaichi Asset Management Co. "We will see increasing competition in a market that's like a sponge right now'' with demand exceeding supply.
Nissan's alliance with Dongfeng, one of the three local automakers picked by the government to lead mergers of the nation's dozens of carmakers, may help it catch up with rivals such as Honda Motor Co. and Volkswagen AG. Nissan expects China sales to contribute as much as 10 percent of its annual growth target of 1 million units within three years, as local production in the world's fastest-growing auto market expands.
The new company will be called Dongfeng Motor Co.
Goldman Sachs Group Inc., which is advising Nissan, declined
to comment on the details of the transaction.
The company plans to make and sell 550,000 vehicle a year by 2006, of which 330,000 will be trucks and buses, double Dongfeng's current production, and 220,000 will be passenger cars and light commercial vehicles, the people said. That target may rise to 900,000 units by 2010.
Last month, Toyota, the world's third-largest automaker, agreed to invest about $2.5 billion together with China's largest automaker First Automotive Industry (Group) Co. to build as many
as 400,000 cars a year.
Nissan's transaction with Dongfeng Motor Corp. will allow Japan's third-largest automaker to bypass hurdles that have restricted existing auto ventures in China, such as making new models without government approval, the people said.
Carlos Ghosn, Nissan's president, will sign the Dongfeng accord tomorrow in Beijing, the Japanese carmaker said. Dongfeng will inject its assets as its investment into the new company, said company spokesman Wu Yuehua, declining to give more details.
"This is good news for Nissan,'' said Dai Nishiyama, who helps manage $22 billion at SG Yamaichi Asset Management Co. "We will see increasing competition in a market that's like a sponge right now'' with demand exceeding supply.
Nissan's alliance with Dongfeng, one of the three local automakers picked by the government to lead mergers of the nation's dozens of carmakers, may help it catch up with rivals such as Honda Motor Co. and Volkswagen AG. Nissan expects China sales to contribute as much as 10 percent of its annual growth target of 1 million units within three years, as local production in the world's fastest-growing auto market expands.
The new company will be called Dongfeng Motor Co.
Goldman Sachs Group Inc., which is advising Nissan, declined
to comment on the details of the transaction.
The company plans to make and sell 550,000 vehicle a year by 2006, of which 330,000 will be trucks and buses, double Dongfeng's current production, and 220,000 will be passenger cars and light commercial vehicles, the people said. That target may rise to 900,000 units by 2010.
Last month, Toyota, the world's third-largest automaker, agreed to invest about $2.5 billion together with China's largest automaker First Automotive Industry (Group) Co. to build as many
as 400,000 cars a year.