China Spells Big Trouble For Japanese Automakers
The row between China and Japan over a few rocks in the East China Sea, alternately called Senkaku and Diaoyu islands, is threatening to derail production and sales plans of Japanese automakers. Many in the industry say that “Chinese consumers are unlikely to return to Japanese cars anytime soon,” as The Nikkei [sub] says. Already, Japanese automakers have curtailed production in and exports to China. The problem may not be a temporary one.
Chinese customers hold foreign brands in much higher regard than Chinese. Conspicuous consumption of foreign products is a signal of achievement. Contrary to lore that the Chinese prefer Buicks because a Chinese Emperor did so, the Chinese long preferred Japanese cars, a fact that clashes with clichés. Until recently, Japanese brands outsold all others in China, now they are in place two after being overtaken by the Germans.
That was before the Chinese riots over the rocks in the sea, that led to the smashing of Japanese-branded cars, torching of dealerships that sold them and attacks at factories that made them. Suddenly, ownership of a Japanese car means the worst of the worst in China: Loss of face.
Japanese automakers already are adjusting their output.
Toyota has decided to keep its Guangzhou plant, a joint venture with Guangzhou Auto, closed for an additional four days until it will be shut down for eight days for the October holidays, says the Nikkei. The plant makes the Camry and the Highlander. When it will reopen, the plant will go from two shifts to one.
According to the same report, Nissan will suspend production three days earlier than scheduled at three Chinese manufacturing facilities. Honda is considering going to one shift at its Guangzhou factory.
Reports by the Yomiuri Shimbun that Toyota did stop auto exports from Japan to China were discounted by a Toyota spokeswoman in Tokyo. “We are adjusting output, we did not stop it,” the spokesperson said.
While these outbursts in China tend to blow over faster than they started, market observers worry that Japanese brands have received a lasting and hurting dent in China. “When choosing between a Japanese or a German-branded car, both equal in terms of value, why would you buy a Japanese car when you see residents smashing them in such anti-Japan protests?” Song Jian, president of Tsinghua Institute for Automotive Technology, told Bloomberg. “It would definitely weigh on your buying decision.”
Koji Endo, auto analyst at Advanced Research Jaoan sees sales of Japanese brands go down by 20 to 30 percent,” Reuters reports. “The last time we had protests like this in 2010, the effects only lasted about a month, but I think this time is going to be different. This is going to have a serious impact,” Endo said. Smaller anti-Japanese protest in 2005 and 2010 were mostly for foreign consumption and either rarely noticed or mostly ignored by the Chinese population. Not so this time around.
Numerically, Nissan has the highest exposure in China with 1.25 million sales in 2011, and plans for much more in this and future years. Goldman Sachs figures that Nissan generates about 30 percent of its profit in China, compared with 17 percent at Toyota and 15 percent at Honda. Spokespeople at Nissan did not want to go on record, citing the sensitivity of the matter, but expressed hopes that business interests prevail.
Ironically, it is the Chinese government that is immediately hurt by these developments. Nearly all joint venture partners of Japanese carmakers are Chinese State-Owned Enterprises. A sudden shift in customer perception exacerbates problems with a slowing market. However, most of them have joint venture partners from other countries. In the case of Toyota, joint venture ;partner FAW is also a big partner of Volkswagen, and its Guangzhou partner signed on with Fiat. Honda’s and Nissan’s partner Dongfeng has JVs with Kia, and PSA Peugeot-Citroen. But it would not be as easy as making Volkswagens where one made Toyotas.
Join the conversation
Latest Car ReviewsRead more
Latest Product ReviewsRead more
- Dartdude Biden's administration is full of unqualified people. This is what happens when you don't hire on merit. Pothole Pete is living proof of it.
- Dukeisduke Oh brother, these high-end BEVs are getting ridiculous. Faraday Distant Future, or Faraday Never? I'm betting on the latter.
- Kwik_Shift After finally seeing a Dodge Hornet in person, I was so underwhelmed that I didn't even want to test drive it.
- Dukeisduke The new Range Rover Sport SV takes the concept and cranks its wick to 626 horsepower, meaning that when it's not in the shop, this Rangey is capable of hitting 60 mph from rest in just 3.6 seconds.FTFY
- IBx1 I'm so sick of MPGe; just tell me how far it goes on electricity and then tell me what MPG it gets from that point forward for a plug-in, or give me miles per kWh for an EV.
So it was and so it shall be. The circle of life continues. They're now going through the Japan bashing phase that the US went through in the 80's. Next comes whatever the equivalent of China bashing is for the Chinese. High probability it will be the U.S.
"Even though I am American I somehow managed to read the excerpts of Ahmadinejad’s latest tirade at the UN and drawing my own conclusions was greatly, if predictably, appalled." I think Americans overestimate Ahmadinejad's actual standing in Iranian politics. He makes a lot of noise, but domestically he actually doesn't have as much clout as one might think. The real power in Iran lies with the mullahs (ayatollahs). Also, he isn't all that popular; in the last election, his re-election victory was widely believed to be rigged and there were violent protests all over the results of the elections that had to be put down with police action. Ahmadinejad isn't running again, so he will pass from the scene soon.