Nissan Weighs it’s Options: New Infiniti Plant in North America?

Nissan Motor Company is considering opening a new Infiniti manufacturing plant to produce it’s vehicles in North America. Nissan’s  Infiniti production, with the exception of one model, is done entirely in Japan. However, it seems the company has a lot to gain from expanding it’s manufacturing facilities into North America.

One of the key reasons for this expansion is to avoid losing money from the cost of changing currency. According to the article, “A strong yen hurts the price competitiveness of Japanese exports and reduces the value of profits earned abroad when they are returned home.” The additional revenues generated could be used to provide a lower price on Infiniti vehicles or fund the investment of the new factory.

Another reason a new plant would be beneficial is because it would allow the sharing of resources with existing Nissan operations in North America. This would shorten the supply chain for many essential components including core vehicle parts. A shorter supply chain can increase the speed of production as well as decrease costs of shipping parts.

Lastly, producing Infiniti vehicles close to where they will be sold will decrease transportation costs. The article didn’t state any information regarding the amount of these transportation costs. However, they are likely quite expensive due to the large distance between the United States and China. Although shipping by water is relatively inexpensive, it is also the slowest form of transportation. A plant in North America would allow many alternatives such as railroads and trucks.

Because of these reasons, Infiniti Motor Co. President Johan de Nysschen is currently debating the possibility of opening a plant in the United States, Canada, or Mexico. The new plant is expected to produce over 100,000 Infiniti vehicles per year. According to the article, the cost of a new plant will be approximately 2 billion dollars. It is also possible to add Infiniti capacity to an existing Nissan plant for approximately half the price. Alternatively, an investment into Chinese Nissan plant  to add Infiniti capacity will only cost 323 million.

Although the Chinese plant would be a much cheaper investment, it probably isn’t the best option. Last year, Infiniti only sold about 11,000 to 12,000 cars in China, while 119,877 cars were sold in the United States. Although sales in China are expected to rise to 15,000 to 16,000 vehicles this year, this amount is nothing compared to the sales in the U.S. Since nearly 70% of last years sales were in the U.S., it seems North America would be an ideal location for the new factory.

What do you think is the best investment for Nissan to pursue? Should they open a new factory to increase productivity? If not, what would you suggest they invest their money in?

6 thoughts on “Nissan Weighs it’s Options: New Infiniti Plant in North America?

  1. This article is interesting. Something I didn’t notice being stated (sorry if I missed it) was the fact that a plant in North America would maybe help the unemployment in the city they decide to build it in. Having a factory in China might be cheaper because of labor laws and material being there but like the author said, transportation cost cuts a huge profit out of what they could be making. Personally, I would advise Nissan to consider building a plant in America. They would be helping the economy as well as saving time and money due to less transportation time/cost. Productivity might increase but I also think it would be a good advertising point. Americans might like the idea of their car being manufactured in the United States and still be a foreign vehicle. I’m interested to see what Nissan will decide to do and how it would help the unemployment rate in the city they decide to build in.

  2. I am not sure to what would be the “best” investment for Nissan because there are no actual numbers. However, if they do decide to open a new factory in North America, it will create a new demand for jobs. This will decrease the unemployment rate which is overall good for our economy. Transportation cost will decrease but in exchange, I think wages will increase.

  3. The best investment for Nissan would be to build the plant in Mexico because it would provide Nissan with a great source of cheap labor. Building in Mexico would also reduce transportation costs of vehicles to the U.S. While this would certainly not be the choice that Americans would want, it would be the best choice for Nissan, who have an obligation to create wealth for shareholders. Nissan should only invest in a new plant only if the increased productivity has a greater value than the cost to build and maintain the new plant. If Nissan did build a plant in Mexico, they would have an ethical obligation to help improve the community where the plant will be built.

  4. Operation managers at Nissan Motor Company play a key role in deciding which option would be more profitable for the organization. The automobile market is certainly becoming increasingly competitive and thus more emphasis is being placed on supply chain. I personally believe opening up a plant in North America would be a good low cost strategy and will also be very close to where they generate most of their revenue from, in this case, the United States. Managing a new supply chain is certainly a challenge but I think the long term benefits of fast transportation and the expansion of its operations outweigh the challenges they may face with different laws or ethics dilemmas, to name a few.

  5. I definitely think that Nissan should open a new Infiniti plant in the US. It would help to create a supplier hub near the manufacturing plant, similar to the new plant Boeing in North Charleston, NC. It would reduce carrying costs, transportation costs, etc. They might even be able to sell more cars, because nowadays customers know what kind of features they want in a car. If they are able to produce and deliver the car faster (kind of like JIT) then it could mean a higher retention rate. Personally, if a dealer was not able to get me a personalized car with in a couple of weeks, I would just go somewhere else.

  6. I think it would be more profitable for Nissan/Infiniti to continue operations in China. The labor there is cheaper than nearly everywhere else in the world, and they have the most human resources all together. Plus, the price of the new plant would drive their bottom line way down. Not only will the plant cost them $2 billion, but the labor will be exponentially more expensive, too. I think choosing not to build a plant in the U.S. would be the best option for Nissan.

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