Toyota China Sales Plunge 40 Pct 丰田9月在华汽车销量下降40%
We’ve been hearing for weeks now how bad things for Japanese automakers in China due to diplomatic tensions over a territorial dispute, and now we’re finally starting to see some numbers that underscore just how serious the situation is. So now the questions becomes: How long will this sales crisis last, and who are the most obvious winners and losers? I’ll get to that issue in a moment, but first let’s have a look at the news coming from Toyota (Tokyo: 7203), which said its China sales plunged 40 percent in September as Sino-Japanese tensions flared over the ownership of a small chain of islands known in China as the Diaoyu and in Japan as Senkaku. (English article)
A senior company executive said Toyota sold just 50,000 cars in China last month, of sharply from 86,000 a year earlier. Toyota and fellow Japanese automakers Nissan (HKEx: 7201) and Honda (Tokyo: 7267) have all cut back production at their China-based plants in the last month as Chinese consumers shunned the Japanese brands at the height of the dispute. Toyota previously said its cutbacks could remain in place through November.
It’s probably safe to say that both Nissan and Honda saw similar slowdowns in September, which are likely to hit third- and fourth-quarter results for not only themselves but also for their Chinese joint venture partners. Those include Guangzhou Auto (HKEx: 2238), which counts both Nissan and Toyota as its partners; and Dongfeng Motor (HKEx: 489), whose partners include Honda and Nissan. (previous post) Both Dongfeng and Guangzhou Auto have seen their stock drop since the spat began, with shares of both companies down more than 10 percent over the past month.
So now let’s move on to the question of fallout. Based on past disputes, the memory of Chinese consumers tends to be relatively short once Beijing has decided it wants to clamp down on displays of public outrage. Chinese media reports on the dispute have already dropped off sharply in the last week, and have been replaced by more menacing reports on the arrest and potential punishment of people who participated in illegal activities such as burning cars and looting Japanese property.
That means people who shunned Japanese autos out of fear that their cars might be attacked by angry mobs could soon return to Toyota, Honda and Nissan showrooms once their concerns subside. Likewise, consumers who used their wallets to show their displeasure at Japan during the dispute are also likely to soon forget their anger now that the story is out of the headlines.
My best guess is that the sales drop will continue throughout October, but that it will probably ease a bit and ultimately fall 20-30 percent from the previous year. Decreases will probably continue through the end of the year as well, with December figures down around 10 percent, before things return to more normal levels by the Chinese New Year next February.
Meantime, the main beneficiaries of the drop are likely to be other mainstream foreign auto brands. The most obvious ones that come to mind include GM (NYSE: GM) and Volkswagen (Frankfurt: VOWG) from the west, and Korean automakers Hyundai (Seoul: 005380) and Kia (Seoul: 000270). Look for China sales of GM and Volkswagen in particular, which were already trending well for the year, to accelerate a bit through the end of the year. That should also bode well for their Chinese joint venture partners, most notably SAIC (Shanghai: 600104), which works with both companies.
Bottom line: Japanese automakers are likely to see weak China sales through the end of the year due to a diplomatic dispute, which will benefit other foreign automakers like GM and Volkswagen.
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