Nachi Establishes Joint Venture in China for Air Conditioning Bearings

Nachi-Fujikoshi Corp. (Japan) has established a joint venture plant in China with Shanghai Automotive Industry Corp. (China), the largest automotive parts manufacturer in China. The venture, Nachi Shanghai Bearings Co. Ltd., is outside Shanghai. of the total $2.1 million invested in the company, Nachi contributed $1.4 million, or 67%. The purpose of the venture is to get Nachi more involved in the fast-growing Chinese auto parts market; in other markets, Nachi's main customers are in the automotive and auto parts sectors. SAIC is a key vendor in China and Nachi has had a supply relationship with them since the mid-1990's. The joint venture manufactures bearings for SAIC to use in automotive air conditioning units. These are not yet new sales, as production in China simply replaces bearings Nachi would have exported to SAIC from Japan. Eventually, however, Nachi Shanghai Bearings is expected to be exporting up to 40% of its output. The 2,500 square meter facility is not yet operating at capacity, Nachi said it expects the plant to produce 1.2 million bearings this year, and 2 million by 2006. Nachi Shanghai Bearing is another step in Nachi's long-term China strategy, where, it said, the growth prospects are, "especially outstanding." In addition, Nachi is being forced to move into china as its traditional auto and auto parts manufacturer customers are expanding their own manufacturing operations in China. Rather than lose the business, Nachi said, "reinforcement of bearing supply structure and expansion of marketing outlets in China are becoming necessary." Also, as the domestic Japanese market for bearings has matured and become saturated, Nachi said it sees the need to develop bearing manufacturing, marketing and service operations in other markets -- primarily Asia and North America. From no plans for the country in 2001, and only a market research project in 2002, Nachi is implementing aggressive plans to dramatically increase its presence in China. By 2007, Nachi is targeting a 50% sales growth rate in China, from ¥6.7 billion to ¥ 10 billion. In 2003, Nachi's sales inside Japan improved 6%, but sales in Asia -- especially China -- grew by more than 30%. Across other world markets, overall sales grew by an average of 14%. In its three-year plan through the end of 2006, Nachi said it intends to increase its sales outside Japan to 40% of the company's overall sales. To accomplish that goal, the plan budgets ¥ 25 billion for plant and equipment investments outside Japan.