Nissan Motor Co. has decided to cut back on imports from Mexican plants, suggesting that expansion plans in Brazil will be accelerated. Nissan President Carlos Ghosn said that the agreement between the two largest auto markets in Latin America means that "the ramp-up” of the Brazilian facility will have a faster pace than what it had predicted.
Nissan faces pressure to boost production in Brazil, where the company expects to spend 2.6 billion reais ($1.4 billion) to quadruple annual capacity by 2014, after Mexico agreed to reduce exports to the country by up to 30% for the next three years.
Macquarie Group Ltd. estimates that sales of light vehicles in Brazil, which surpassed those in Germany in 2010, could increase to 3.8 million units by 2014. Takashi Aoki, senior fund manager at Mizuho Asset Management Co. in Tokyo, said that it would be a good thing for Nissan to hasten its expansion in Brazil. Credit Suisse Group AG said that this shows how Nissan is using “good foresight."
The trade agreement has a greater impact on Nissan than on Honda Motor Co. or Mazda Motor Corp. For now, Nissan brings in most of the units sold in Brazil from Mexico, where its yearly output of 600,000 vehicles is 10 times Brazil’s capacity.
The company said that the automaker intends for production at an assembly plant in Rio de Janeiro to begin in 2014 to add 200,000 vehicles in annual capacity. When it comes to earnings, Ghosn believes that 2012 would be a "much better year" than 2011 over expectations that the industry won’t experience the natural calamities last year. He also is latching on to hope that the monetary policy will relax.