Nissan Motor Co's two vehicle joint ventures in China have clinched a merger deal as the latest move in the Japanese automaker's reshuffing its local operations.

Dongfeng Automobile Co Ltd, the Shanghai-listed affiliate of Dongfeng Motor Co Ltd a 50-50 joint venture between Dongfeng Motor Corp and Nissan will acquire a 51 per cent stake of Nissan's other joint venture Zhengzhou Nissan. Zhengzhou Nissan is based in Central China's Henan Province.

Dongfeng Automobile, which is 70 per cent owned by Dongfeng Motor Co Ltd, will pay 242 million yuan (US$29 million) to buy a 35 per cent stake of Zhengzhou Nissan from Chinese financial firm Citic Group, reported China Daily.

Dongfeng Automobile will also pay 111 million yuan (US$13 million) to acquire 16 per cent of Zhengzhou Nissan from Zhengzhou Light Vehicle Co. At present, Zhengzhou Nissan's three stake owners Citic, Zhengzhou Light Vehicle and Nissan, control 35 per cent, 35 per cent and 30 per cent stakes respectively.

Officials from Dongfeng Automobile told China Daily that the final equity structure of Zhengzhou Nissan "will be fine-tuned in line with the government's requirements." After the equity merger, Nissan now owns a total 55.5 per cent stake in its two car joint ventures in China.

Nissan will transfer "a small part" of its stake in Zhengzhou Nissan to Dongfeng Motor Corp, officials said.

Foreign automakers are only allowed to control a maximum stake of 50 per cent in their joint ventures with Chinese partners, according to China's auto policy.

Zhengzhou Light Vehicle will retain a share of 19 per cent in Zhengzhou Nissan after the merger.

Sales networks of Nissan's two joint ventures will also be integrated after the equity merger.

Dongfeng Motor Co Ltd, launched in July last year with a registered capital of US$2 billion, is the biggest Sino-foreign auto joint venture in terms of investment.

The venture, based in Central China's Hubei Province, is producing Nissan-brand passenger vehicles and Dongfeng-brand commercial vehicles, and aims to double its annual sales to 620,000 units by 2007.

Zhengzhou Nissan was formed in 1993 and produced more than 20,000 Nissan-brand sports utility vehicles (SUVs) and pick-ups last year.

"The merger will supply our gap in SUVs and pick-up segments and represents a substantial step towards becoming an internationally competitive automaker," said Miao Wei, chairman of Dongfeng Motor Co Ltd.

In 2003, Nissan's car technical licensing production base in South China's Guangdong Province was absorbed into Dongfeng Motor Co Ltd.

Analysts said the merger between Nissan's two joint ventures will also pave the way for French auto producer Renault, which owns a 44 per cent share of the Japanese firm, to set up a car joint venture with Dongfeng Motor Corp.

Renault announced in June that it will set up a joint venture with Dongfeng Motor Corp to produce cars from 2006 in China with a planned capacity of 300,000 units annually.

Sources close to Dongfeng Motor Corp said the expected Renault-Dongfeng joint venture would have two plants in Hubei and Guangdong.

Foreign automakers are allowed to set up at most two joint ventures with different Chinese partners to make the same categories of vehicles, according to the auto policy.

If a foreign automaker controls a relatively majority stake in another foreign automaker, they will be treated as one entity in China when it comes to the requirement on the number of Sino-foreign joint ventures.

Dongfeng Automobile reported 241 million yuan (US$29 million) in net profit during the first half of this year.

Its share price stood unchanged at 4.3 yuan (US$0.51) yesterday.

Source: China Daily