Japan Automakers Hit New Roadblock 日本汽车制造商遇新障碍
Just as they were recovering from the massive earthquake in Japan more than a year ago, Japanese automakers have hit a new obstacle in China that could once again put the brakes on their growth, though this time the problem is diplomatic rather than a natural disaster. China watchers will know the problem I’m referencing is the recent escalation of tensions between China and Japan over a small group of uninhabited islands, the Diaoyu to the Chinese and Senkaku to Japanese, that both countries claim as their own. This latest flare-up highlights a unique risk for Japanese companies doing business in China, where a deep-seated mistrust lingers among many Chinese due to Japanese aggression during World War II.
At an auto show this week in the interior city of Chengdu, a top executive at Nissan (Tokyo: 7201) acknowledged that the island spat, which has received widespread media coverage in both China and Japan, has forced his company to curb its marketing events throughout China. (English article) That could affect the company’s August car sales, and the effects are likely to linger through the end of the year depending on how this latest flare-up plays out.
Other major Japanese auto makers are also likely to feel the effects, including the country’s other 2 top manufacturers, Toyota (Tokyo: 7203) and Honda (Tokyo: 7267). Not surprisingly, Toyota was focusing on the longer-term picture at the same auto show in Chengdu, saying it could double its China car sales by 2015. (English article)
All of the Japanese auto makers were hit hard when a massive earthquake and tsunami hit northern Japan in March 2011, causing major disruptions to their supply chains. As a result, most of the Japanese car makers saw their China sales growth trail the broader market last year, and even saw their sales drop in some cases. Nissan’s sales have posted strong growth so far this year and Toyota’s sales were also coming back, but now this latest political twist means both companies could see their growth slow once again as Chinese shoppers for foreign-name cars look to brands from the US and Europe instead of Japan.
This kind of anti-foreign sentiment occurs from time to time in China, often when Beijing is unhappy about something a foreign government has done and uses the state-controlled media to voice its displeasure by whipping up nationalistic sentiment among average Chinese. I can still vividly recall the nationwide series of anti-Japanese protests of 2005, which began after Japan’s approval of a controversial school textbook downplaying the country’s World War II aggression.
Those demonstrations saw big numbers of Chinese burning and looting Japanese restaurants and hurling rocks and paint at the Japanese embassy and consulates throughout China. I was in Shanghai at that time, and one of my most vivid memories was of a Nissan car that had been overturned by angry crowds and set on fire.
These kinds of anti-foreign activity are most often short-lived, and I would expect this latest island flare-up to last no more than another month or 2 before both sides decide to put aside the issue for now. But the flare-up will definitely impact the sale of Japanese goods in China for the next couple of months, and the effects are likely to linger at least through the end of this year.
Bottom line: Japanese automakers are likely to suffer slow sales for the rest of this year due to negative consumer backlash stemming from an ongoing diplomatic dispute between China and Japan.
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