Caixin
Oct 22, 2012 02:29 PM

Storm over Diaoyu Islands Dispute Batters Japan's Automakers in China

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(Beijing) – The storm caused by the Sino-Japanese dispute over uninhabited islands in the East China Sea is battering Japan's automakers.

As the governments of the two countries bicker over which country owns the Diaoyu Islands, which the Japanese refer to as the Senkakus, Japan's automakers have seen sales in China fall off and been forced to slow production.

Nissan Motor Co.'s joint ventures in Guangdong and Henan provinces halted production in mid-September for two days in the wake of sometimes violent anti-Japanese protests across China. Plants run by Toyota Motor Corp., Honda Motor Co. Ltd. and Mazda Motor Corp. also fell silent.

The September sales figures for Toyota, Honda and Nissan also took a hit, falling between 35 and 49 percent compared to the same month last year.

The China Association of Automobile Manufacturers (CAAM) said Japanese automakers sold about 160,000 cars in September in China, down 41 percent year on year. Overall, Japan's share of the Chinese auto market fell to 12 percent in September from 19 percent the month before.

The damage to Japan's automakers is worse than that done by the 2011 earthquake that shook the country, said Pang Qinghua, chairman of Pang Da Automobile Trade Co. Ltd., the nation's largest importer of Subarus.

The 9.0 magnitude quake in March 2011 damaged auto plants and caused shortages of key parts at joint ventures in China, slowing production for a spell.

"Last year, their factories stopped production, but we still had consumers," Pang said. "This time the situation is totally different."

Li Chunbo, an analyst at CITIC Securities Co. Ltd. in Beijing, said the dire picture recently emerging is part of a larger pattern.

"It has been a trend that the competitiveness of Japanese cars has declined and their market share decreased. The island dispute just accelerated their fall, which might be a turning point for Japanese automakers in China."

The Customer is Always Right

Over the past ten years China's auto market has enjoyed double-digit average annual growth. Even in 2008, as the global financial downturn hit, 9.38 million cars were sold in China, up 6.7 percent compared to the previous year.

In 2008, the market share of Japanese cars was 30.8 percent, the highest ever. However, from 2009, Japan's share of the market has declined, and by last year stood at 21.6 percent.

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