By Maki Shiraki

TOKYO (Reuters) - Japan's Nissan Motor ( NSANF ) may bring production of its ultra-compact electric vehicles in-house, five people familiar with the matter said, emboldened by the success of its Sakura model currently built by junior partner Mitsubishi Motors ( MMTOF ).

The automaker is considering moving production to its factory on the southern island of Kyushu in the business year starting April 2028, said two of the people, who declined to be identified as the information was private.

Nissan ( NSANF ) and Mitsubishi denied the plan.

The Nissan Sakura was Japan's best-selling vehicle in the passenger EV market in 2023 with a 42% share, showed Reuters calculations based on auto associations' data. Sales have hit almost 64,000 vehicles since its introduction in mid-2022.

The performance of the Sakura - meaning "cherry blossom", Japan's national flower - is a bright spot for Nissan ( NSANF ) whose EV efforts have been eclipsed by the likes of U.S. rival Tesla and Chinese leader BYD which, in China, have pushed the Japanese automaker out of the top 10 brands.

Bringing production in-house would allow Nissan ( NSANF ) - an EV pioneer with its Leaf compact car - to boost its profit margin which is below that of domestic peers Toyota Motor and Honda Motor.

The Sakura is sold only in Japan where it is classed as a "kei car" - boxy vehicles that are smaller and less powerful than regular cars, primarily made for the domestic market.

It is manufactured at Mitsubishi's Mizushima plant in western Japan. Nissan ( NSANF ) will continue to rely on the plant for production of its other kei cars, the people said.

Nissan ( NSANF ) expects kei EV sales to expand, the people said, as kei cars are relatively inexpensive compared to regular cars and their size makes them suitable for short-distance trips.

By bringing light EV production in-house, it hopes to "raise production efficiency and reduce costs", one of the people said.

Nissan ( NSANF ) and Mitsubishi will continue to handle the planning and development of kei EVs through 50-50 joint venture NMKV, the person said.

Nissan's ( NSANF ) Kyushu plant has an annual production capacity of 500,000 vehicles. The automaker expects to use about 80% of that capacity in the current business year, one of the people said.

Nissan ( NSANF ) will free capacity for kei EVs by shifting production of its North America-bound Rogue SUV to another part of the site, the person said.