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Nissan Unveils Cheaper R50 in China

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Nissan Motor Co. (NSANY - Free Report) has launched the second model from its low-priced lineup Venucia in China in order to gain a strong foothold in China’s fast growing low-priced market outside major cities. The company will sell compact R50 hatchback with a price tag of 67,800 yuan ($10,760).

The Venucia brand has been developed by Nissan and its joint venture partner in China, Dongfeng Motor Co. Its first model, the D50 sedan, was launched in April this year. The company intends to start selling the vehicle later this month. It expects to sell 10,000 units of R50 per month, which is manufactured using mostly China-made components.

Nissan aims to tap the world’s largest auto market both in the metropolitan as well as in the suburban areas in order to recover its business from the sluggish sales in the U.S. market.

A few months back, Nissan announced its plan to produce two new Infiniti car models in China from 2014 in order to catch up with the leading automakers in the luxury vehicles market including Volkswagen AG’s (VLKAY) Audi, Daimler AG’s (DDAIF) Mercedes Benz and BMW AG.

Nissan also opened its new global headquarters of Infiniti in Hong Kong in order to strengthen the brand’s foothold in China. The company’s President and CEO Carlos Ghosn stated that it plans to occupy 10% of the luxury car market in China in the near future, up from 3% currently.

Ghosn also reiterated the company’s target to increase Infiniti sales to 500,000 vehicles by 2016 from 145,000 vehicles in 2011 and expand into 70 markets from 45 markets currently. In this year, the company plans to launch the brand in Australia, Chile, Mexico, South Africa and Hong Kong.

Nissan is not the only automaker who intends to catch up with its rivals in the emerging markets. Recently, Toyota Motor Corp. (TM - Free Report) announced plans to introduce eight compact car models in the emerging markets including Brazil, China, India and Indonesia by 2015 for the same reason.

Ford Motor Co. (F - Free Report) also embarked upon an aggressive expansion plan in China that includes plans to triple its lineup in China by introducing 15 models, including the Kuga small sport utility vehicle by 2015. General Motors Co. (GM - Free Report) has also developed a low-priced Chinese brand, Baojun, with a local partner to entice Chinese buyers.

Nissan, a Zacks #3 Rank (Hold) stock, witnessed a 15% fall in profits to ¥72.3 billion ($903.5 million) or ¥17.24 (21 cents) per share in the first quarter of fiscal 2012 ended June 30, 2012, from ¥85.0 billion or ¥20.32 in the corresponding quarter last year. Reported profit also missed the Zacks Consensus Estimate of 51 cents per share.

Revenues in the quarter grew 2.6% to ¥2.14 trillion ($26.64 billion). Unit sales increased 14.6% to 1.21 million vehicles globally. Net sales grew 12.4% to ¥1.1 trillion ($13.80 billion) in Japan, 7.2% to ¥754.9 billion ($9.4 billion) in North America and 6.1% to ¥518.8 billion ($6.5 billion) in Asia. However, revenues in Europe declined 12.8% to ¥371.5 billion ($4.6 billion) during the quarter.

Operating profit in the quarter fell 20% to ¥120.7 billion ($1.5 billion) from ¥150.4 billion in the year-ago quarter. The decrease in operating income was due to unfavorable foreign currency translation, high selling costs in North America due to product renewal cycle and unfavorable pricing.

Nissan expects to launch new products and renew major lineups across its namesake, Infiniti and Venucia brands. The company expects total sales to increase 9.5% to ¥10.3 trillion ($128.8 billion) in fiscal 2012.

Operating income is projected to surge 28.2% to ¥700 billion ($8.75 billion) in fiscal 2012. Profits expect to go up 17.2% to ¥400 billion ($5 billion) or ¥95.44 ($1.19) per share for the year.

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