Nissan wary of excess capacity in Russia car market

Nissan Motor Co sees strong growth continuing in Russia over the next five years but is wary of getting stuck with a car surplus when growth inevitably declines, executive vice president Carlos Tavares told Reuters.
Japan's third-largest auto maker is building a $200 million factory in Russia's second city St Petersburg with a capacity of 50,000 cars. It will start assembling the Teana sedan in early 2009 and the X-Trail sport utility vehicle in mid-2009.
"Of course one day this growth will slow down. This market will not stay at 40-50 percent growth," Tavares said in an interview on the sidelines of the semi-annual Moscow carshow. He added that strong growth is expected in the short to medium term, which he defined as a five year time horizon.
"We do not want to get stuck with too much capacity... We will go step by step," Tavares said. He added the eventual slowdown in sales growth in Russia will be gradual. "I don't expect any brutal variations."
Other carmakers are placing more bullish bets on the Russian market with Volkswagen AG putting online 150,000 units of new capacity annually within two years. Nissan, in which French car maker Renault has a 44 percent stake, has said its sales targets for Russia stand at 170,000 cars in 2008, representing an increase of 46 percent on last year.
The Japanese auto giant is counting on emerging markets such as Russia, which is Nissan's fifth largest sales market globally, to keep its sales numbers climbing. "The growth is all coming from the emerging markets," said Simon Sproule, Nissan's corporate vice president.
With Nissan sales forecast to grow by 50,000 units in Russia this year, the Russian market will account for around half of the growth in Nissan's global sales, which will go from 3.6 million to 3.7 million units in 2008, Sproule said. In this context, sales in Japan will decline slightly, while the US car market, bearing the brunt of the global financial slowdown, is set to turn into a "bloodbath" this year, Sproule said. Analysts say Russia will become Europe's largest car market in two to three years, with total sales of around $100 billion in 2011.