In a first for the Japanese automobile industry, Nissan said the next generation of its Rogue sport utility vehicle would be built partly in South Korea, Japan’s former colonial ward and present-day carmaking rival.
Since the second world war, Japanese manufacturers have had little overt presence in South Korea, where an often brutal 35-year occupation left deep scars. No Japanese carmaker operates a factory in the country, and on South Korean streets Toyotas, Hondas and other Japanese marques are rare.
Nissan’s move comes at a time when longstanding political tensions between Japan and Korea have come back into focus. Over the past month, a Korean man drove a truck into the gate of the Japanese embassy in Seoul, in apparent protest over a territorial dispute, and Korea cancelled a planned intelligence-sharing pact with Japan in the face of public opposition.
Nissan’s Korean-made vehicles will not be sold locally. The company said on Friday that it would export the roughly 80,000 Rogues that will be built in Busan beginning in 2014 to the US, where sales of the small “crossover” 4x4 have roughly doubled since the start of 2010.
Japanese carmakers are increasingly moving production outside their home country in response to a persistently strong yen that has made exporting from Japan unprofitable.
Nissan, Japan’s second-largest carmaker by sales, currently makes Rogues at its plant in Kyushu in southern Japan, but had planned to shift production to its plant in Smyrna, Tennessee, in the US when the model is updated next year. Now, output will be split between Smyrna and Busan.
Building in South Korea offers several advantages, including a relatively cheap won and low-tariff access to export markets thanks to trade agreements between Seoul and the US and Europe – something lacking in more protectionist Japan.
The more immediate reason for Nissan’s decision, however, was spare capacity at the Busan factory, which is owned by Renault Samsung Motors, a joint venture between Korea’s Samsung group and Nissan’s alliance partner Renault of France.
RSM has struggled to compete in Korea against Hyundai, the country’s dominant carmaker, and the Busan plant is making just 60 per cent of the vehicles it was designed to produce.
“The Busan announcement represents a unique ‘win-win-win’ for Renault, Nissan and RSM, demonstrating the flexibility and power of the alliance for all partners,” said Carlos Ghosn, chief executive of Renault and Nissan.
Renault and Nissan will spend $160– million to retool the factory to build Rogues. In the past, some compact cars produced by Renault Samsung have been sold under Renault and Nissan badges in emerging markets such as Russia and the Middle East. But this will be the first time a vehicle will be made in South Korea specifically for a Japanese automaker.
South Korean carmakers have also made cars for sale locally based on Japanese designs, under licence from Japanese groups, but those have always been sold under South Korean brands.