Collateral Damage: Toyota Loses Large Chunk Of China Sales, All Eyes On Nissan

Toyota’s sales in China took a big hit in September, reports by the Yomiuri Shimbun and Reuters say. Executives of Japanese carmakers are putting on a brave face when it comes to China, but are worried that their significant China business could become a casualty of the East China Sea troubles.

No official data are available yet, but the Yomiuri says that Toyota’s September sales in China “halved,” after many Chinese customers canceled their orders in September. Reuters talks about a 40 percent reduction. A senior Toyota executive told the usually very reliable Reuters that Toyota sold about 50,000 cars in China in September, down from about 86,000 in September 2011.

The Nikkei [sub] says that Toyota plans to “drastically slash production in China this month, possibly by around 50% from the initially planned level.” According to the report, Toyota plans to stop Lexus exports to China until November. Lexus cars are Toyota’s main export to China, with about 89,000 units shipped in 2011. Lexus already had a hard time competing with the domestically-produced Audi, BMW and Mercedes.

Smaller Mitsubishi said its sales dropped 62.9 percent to 2,340 vehicles in China in September after a 33.4 percent slump in August, The Nikkei [sub] reports.

10 percent of Toyota’s global volume is sold in China. All eyes are on Nissan, which has the highest China exposure of all Japanese carmakers. Close to thirty percent of Nissan’s global volume was planned to be sold in China this year. At the Latio launch today in Yokohama, Nissan Executive VP Takao Katagiri said that numbers will be made available when China returns Monday from the mid-autumn festival holiday. The week-long (and sometimes two week long) holiday fell in the first week of October this year. Last year, the holidays begun mid September, making comparisons complicated.

However, Audi’s sales rose 20 percent to 35,512 vehicles in China in September, BMW was up 55 percent, Mercedes 10 percent. Sales of GM are not yet available.

In a private conversation today, a leading executive of a Japanese carmaker expressed his hope that the matter will boil over soon, saying that there is “too much at stake for all sides involved.” The stakes indeed are high. Trade between China and Japan climbed to a record $345 billion in 2011, and neither can easily afford a disruption of their already slow economies.

A year ago, Nissan’s CEO Carlos Ghosn said in Tokyo:

“For carmakers, China is one of the most profitable markets in the world. It used to be the United States. Now it is China.”

For Japanese carmakers, this is about to change. Japanese automakers are on an April to March fiscal year, and their second half is likely to take a painful blow.

For all carmakers, this underscores the huge dependency on a Chinese market, which can turn on the whim of Beijing’s rulers. 29 percent of Volkswagen’s global sales were in China this year. GM also sold 29 percent of its global production in China. However, GM is less likely to profiteer from the Japanese misfortunes. More than half of GM’s China sales are Wulings and trucks made with FAW. Chinese who shy away from a Corolla usually don’t want to be seen in a Wuling Sunshine either. From the early data, it looks like the Japanese misfortunes will further German gains.