Nissan hopes to rectify the situation by manufacturing cars in Russia, Patrick Pelata, executive vice president of Nissan Motor Co., told Vedomosti. "We are examining three organizational options for manufacturing in Russia," Mr. Pelata said. "First, we use the Avtoframos factory in Moscow, which belongs to Renault, which owns 44% of Nissan (Nissan owns 15% of Renault). Second, we can build a new car factory. And, third, a joint venture involving a Russian company could be formed. Right now, Nissan is discussing this possibility with GAZ."
Nissan's desire to set up a joint venture highlights its intention to make a relatively small investment, Gairat Salimov, an analyst at Troika Dialog, said. Yelena Sakhnova, an expert at the Consolidated Financial Group, said that a joint venture was logical for Nissan: "It is coming to Russian market a little late and building a new factory takes 2-3 years. A joint venture would allow them to do the same in a year." Co-manufacturing arrangements with Russian auto factories increase Nissan's chances for preferential duties, Ms. Sakhnova noted. Manufacturing cars in foreign countries can reduce prices by 30%. Practical experience has shown that car prices cannot be reduced by more than 15% during the first few years. In that case, inexpensive Nissan models would cost $13,500, rather than $15,000 (the price of the basic Almera model). Nissan cars would therefore fit into the $9,000-$14,000 segment of the market, Russia's second largest, analysts say.
Nissan Motor Co. sales totaled $56.9 billion in the 2003 financial year (ended in March 2004), with net profits exceeding $4 billion.
