The Japanese In China: Horrors! We're Losing!

Bertel Schmitt
by Bertel Schmitt
the japanese in china horrors we re losing

There is a major shift underway in the Chinese auto market. Cars are morphing from something exclusively owned by the rich to an everyday item. Sure, luxury cars are big in China. But the volume growth is in low cost cars. As a result, the market share of sino-foreign joint ventures is eroding. Local players, such as BYD are gaining fast. The foreigners are getting worried.

The biggest loser in market share is Volkswagen. They are hit by a double-whammy of capacity constraints, and a focus on bigger models, while the growth is in the small models. They are building new plants in China, and maybe Suzuki will help them build cheaper cars. GM is holding its own, mainly through the preponderance of cheap little Wuling econoboxes in their portfolio.

The market share of the Hyundai and the Japanese is likewise eroding. The Japanese are sounding the alarm.

And they have all reason to be worried. According to The Nikkei [sub] 2009 was not a good year for Japanese car makers in China. In terms of market share, China FAW Group Corp., a joint venture with Toyota, lost 1.6 percentage points. Guangzhou Honda Automobile Co. slipped from 5.5 percent to 4.4 percent. Dongfeng Honda Automobile Co. dropped from 2.9 percent to 2.5 percent of the market. In the first quarter of 2010, that trend continued (see table left.)

Japanese carmakers don’t want to lose the war in China again and are going on the counter-attack for the hearts and pocket books of Chinese customers. Their strategy: They go native in China, they launch new low cost brands especially for China, and build R&D capacity in China to design for the Chinese market.

At the Beijing Motor Show, Honda (rather quietly) debuted a new brand, called Li Nian. Produced by the Guangqi Honda Automobile joint venture, cars should appear in 2011. Rumor has it, their first car will be based on the Honday City, but will cost 40 percent less. Honda also has plans to create a Chinese brand with Dongfeng Honda joint venture. Hondas are considered luxury cars in China, the new brands are supposed to appeal to the working masses. According to The Nikkei, “this is the first time for Honda to create new brands with a local joint venture.”

Nissan meanwhile is busy building a design studio, set to open in Beijing early next year. Task of the Chinese staff: Design cars that cater to the Chinese.

Toyota is in talks with the local government to build an R&D facility in Jiangsu Province.

Says the Nikkei: “For Japanese carmakers, finding a way to gain momentum in China as quickly as possible is of critical importance to their growth, given the potential of the market.”

Design studios don’t win the war, Honda seems to be the most proactive in the counter-attack, and as the numbers show, they have all reason to do something.

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4 of 5 comments
  • Bertel Schmitt Bertel Schmitt on May 07, 2010

    Actually, this is a recent development that caught many unawares. Remember how large swaths of the B&B thought there are rich Chinese who drive a Buick, and the rest rides around on bicycles? For quite a while, small cars were unsaleable in China. This sure has changed.

  • VanillaDude VanillaDude on May 07, 2010

    China isn't like the US. They remember a Japanese army, air force and navy occupying them for years, enslaving them, killing them and what they did in Nanking was the ultimate crime. While we had a Cold War and occupied Japan, China reach inward, turned communist, and are now only opening their doors after years of struggles. The last thing many Chinese would want is to support Japanese anything. While we in the US conveniently forget who once killed our young men and women during WWII, the Japanese brutalization of China will linger. We fought them for four years, but China was occupied by Japan for far longer, making every day in many Chinese cities a living hell-hole. The Japanese are one of the most arrogant cultures in the world. They are insular culturally and find it difficult to admit wrongs. Naturally Japanese auto manufacturers are acting with wonderment at their current misfortunes in China. After seventy years of American forgiveness, they have been spoiled. The Chinese will not forget how their families were murdered by the people who today wish to sell them a set of shiny wheels. Japan will have to turn native a whole lot more than they currently are. If I were them, I'd even change brand names.

    • See 1 previous
    • Abcb Abcb on May 07, 2010

      VanillaDude: All the Chinese that experienced the war are over 60 years old. They are not exactly the type that would drop 5 mill large on a new car right off the Beijing auto show. The younger people doesn't really care. We know japan as the land of JAV and console video game systems to pirate. Those two along has won more than hearts and minds of Chinese youth who actually buys stuff.

  • Inside Looking Out This is actually the answer to the question I asked not that long ago.
  • Inside Looking Out Regarding "narrow windows" - the trend is that windows will eventually be replaced by big OLED screens displaying some exotic place or may even other planet.
  • Robert I have had 4th gen 1996 model for many years and enjoy driving as much now as when I first purchased it - has 190 hp variant with just the right amount of power for most all driving situations!
  • ToolGuy Meanwhile in Germany...
  • Donald More stuff to break god I love having a nanny in my truck... find a good tuner and you can remove most of the stupid stuff they add like this and auto park when the doors open stupid stuff like that