By Chang-Ran Kim
PARIS, Sept 26 (Reuters) - Nissan Motor Co is on track to sell 100,000 additional vehicles in Europe by the end of the 2004/05 business year, as promised, although sales so far in the region are slightly behind schedule, a top executive at the Japanese automaker said on Thursday.
Nissan, owned 44.4 percent by France's Renault SA , is the only major Japanese automaker to be making money in Europe, but unlike its main rivals it has seen sales in Western Europe drop 7.1 percent in the first eight months of this year compared with the same period in 2001. In the whole of last year it sold 483,000 vehicles.
But Itaru Koeda, executive vice president and a member of the board at Japan's third-largest auto firm, said the line-up of 28 all-new models in the coming three years and a resurgent new brand image would power Nissan to better profitability and higher sales volumes in the next few years.
"The European market is extremely difficult and there are obstacles that don't exist in other regions, but we're on track to reach our target," Koeda told Reuters in an interview.
As part of its "Nissan 180" mid-term business plan, the automaker has targeted an increase in global sales by an extra one million vehicles, of which 100,000 are expected to be added in Europe.
Koeda conceded that selling cars in Europe yielded very little profit -- Nissan's operating profit margin there was just 0.5 percent last year -- going somewhat against the company's policy of shunning anything unprofitable.
He said he saw room for profitability to "improve a little more", although the profit margin would never match the eight percent level targeted globally.
But Koeda also said success in Europe was vital because it had the strictest environmental regulations, the fastest, "roughest" and most finicky drivers, making cars sold there passable anywhere in the world.
"Gaining success and respect in Europe has a big impact on our global strategy in that respect."
Koeda said Nissan, as well as other Japanese carmakers, had a long way to go in planting a favourable brand image in the minds of European drivers, but added it had made much headway in securing new customers with its new designs.
Indeed, Nissan President Carlos Ghosn noted at a Paris Motor Show press briefing earlier that 40 percent of sales in Japan were "conquest sales", or sales to first-time Nissan customers. With the addition of a diesel engine for the new Micra subcompact, he said he expected similar successes in Europe.
Koeda said the key to attracting new customers was to boost its brand identity through "value for money" models such as its popular Z sportscar, unprofitable though they may be, thereby crafting a brand that customers would want to purchase. The new Z, sales of which have already exceeded 10,000 units since its July launch, will go on sale in October 2003 in Europe.
To deliver its medium-term promises in Europe, Koeda said Nissan would aim to raise its production levels at its UK plant, one of its two plants in Europe. Nissan does not disclose its European production capacity, but the figure is believed to be around 450,000 units annually in the UK and 160,000 in Spain.
In the shorter term, he said, the stronger euro would benefit Nissan's earnings, although he could not say by how much. The euro has risen to around 119 yen, compared with the automaker's assumed rate of 110 yen for the business year ending next March.
For this year Nissan is forecasting a jump in group operating profits to 553 billion yen ($4.51 billion) from last year's record of 489.22 billion yen.
It expects a net profit of 380 billion yen, up from 372.26 billion yen, on sales of 6.5 trillion yen.