Toyota's China Sales Way Up! Is Peace Breaking Out?
Toyota, along with its Japanese peers, has wallowed in double digit minus territory in China, ever since cars were upturned and dealerships torched in September over a few uninhabited rocks in the East China Sea. In January, China sales of Toyota shot up 23.5 percent compared to the same month a year earlier. Are Japanese fortunes in China finally turning to the better?
We don’t think so. Neither does Toyota. “The results are higher than a year ago as the Spring Festival fell in January last year,” Toyota told Reuters . Like every year, we are faced with a phenomenon called Chinese New Year. It is hard to grasp unless you have been there, endured WWW III-equivalent fireworks for a month, and lived through closed shops for weeks. Trust me: Something really serious is going on when Chinese close their shops. For the weeks surrounding Chinese New Year, China is for all intents and purposes closed.
Should someone want to attack China, do it during Chinese New Year, the General Staff, their aides and mistresses will all be vacationing in Thailand while the soldiers are back with their families, eating dumplings and hoping to get the one with the coin. Last year, Chinese New Year was on January 23, and sales tanked across the board. This year, Chinese New Year starts on February 10.
The year of the snake can be treacherous. When Chinese new car sales will be announced next week (unless the CAAM did already “beat the traffic” and is on vacation,) January numbers will be glorious. February numbers, announced in March, will be horrendous. With the help of TTAC, you can crease your forehead and announce: “January sales in China will go to the Moon, but in February, that bubble will burst. Want to bet?” It’s a sucker bet, try it. If you can find that sucker, TTAC can make you rich.
Likewise, Japanese sales will be way down in February, percentage-wise. Ye Sheng, an analyst at Ipsos, told Reuters that“focus should be on the first-quarter data rather than monthly figures.” We agree. A year ago, we told you, and we will tell you again: “Ignore any numbers coming from China in January or February, especially percentages.”
As for the sales of Japanese brands in China, I expect continued rough sledding. As you can see from the chart, sales have improved, along with huge marketing activities and discounts. In China, to drive a foreign-branded car is a sign of achievement. After the riots, driving a Japanese-branded car caused loss of face. This will not go away over night.
Toyota thinks likewise, and cautiously plans for 900,000 units to be sold in China this year. That would be 2 percent above the 2011 crisis level. In 2012, Toyota’s sales in China dropped nearly 5 percent to 840,000.
Japanese OEMs, along with their Chinese joint venture partners, see their profits suffer from the islands spat. We will probably hear more this coming week when Nissan and Toyota will announce their quarterly results.
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The Chinese pride themselves on their long, long history. "5,000 years continuous history" they are fond of telling you. Part of that is they never forget. The Japanese are unlikely to be forgiven their actions in the 20th Century. Ever.
The general trend is that the japanese car makers are gradually recovering lost ground. I predict they will recover all the lost ground before Q1 is over. The anti-japanese nonsense is just flash-in-the-pan. As much as the national government likes to fan nationalism, chinese people are just not nationalistic by nature. This too shall pass and the japanese carmakers will again continue their conquest in China.