Nissan chief calls for free trade pact

New factory ruled out if barriers stay and car maker won't undertake major investment while cross-border restrictions limit markets.

Nissan will not establish another manufacturing plant in the MENA region until cross-border trade is streamlined.

Nissan will not build another manufacturing plant in the MENA region unless there is a free-trade agreement between Arab countries, says Carlos Ghosn, its chief executive. The car maker has a plant in Egypt and a factory under construction in Tangiers but will not establish another in the region unless cross-border trade is streamlined, Mr Ghosn said in Abu Dhabi yesterday.

"We need a free-trade agreement between the Arab countries," he said. "This is the best way to boost and act as an incentive for car makers to establish capacity in the Middle East. "As long as we don't have a free trade [agreement], or at least effective free trade in the Middle East, it will be very difficult to go and make an investment of large capacity if you cannot sell in a seamless way in Arab countries."

Nissan exports about 50,000 cars a year to the Middle East from South Korea, and Mr Ghosn said the company planned to boost production overseas, in part to offset an unfavourable exchange rate created by the rising yen. Over the past couple of years, the yen's rise has limited Nissan's Middle East sales, he said. "If you take a look at the historical evolution of the Japanese brands in the Middle East, the increase in market share has been very steady - from us, Toyota and the other Japanese brands," Mr Ghosn said.

"But since 2008, it doesn't happen any more. The best we're doing is holding market share. Why? Because we are, in a certain way, bearing the headwind of the currency." The company is expecting to sell slightly more cars in the region for the financial year that ends next March 31, said Gilles Normand, the corporate vice president for Africa, the Middle East and India. The company expects to sell 130,000 Nissan and Infiniti cars in the GCC, and a total of 200,000 in the wider MENA region for a slight increase over the previous year but not quite up to the levels during the last boom, Mr Normand said.

"The market has not come back there yet, but somewhere quite close to 2008." The region continues to be one of the biggest markets for the 4x4 Nissan Patrol, which has doubled its market share to 20 from 10 per cent since the launch of the new model in February, Mr Normand said. Nissan's latest global sales figures also point to a strong recovery. In the first quarter of its fiscal year, to the end of June, Nissan sold a total of 954,000 vehicles, up 32 per cent from the same period last year.

Net revenue increased 35.3 per cent to ¥2.05 trillion (Dh88.24 billion), while operating profit was ¥167.9bn yen, up from ¥11.6bn in the same period last year. Mr Ghosn said he was confident this would be a record year for the car industry, despite the slowing recovery in the US and China. "The industry is facing a market with slower growth than expected, or a slower recovery than expected, but then at the same time a strong boom in specific markets, like China," he said.