Analysis: Japanese automobile manufacturers' sales prospects in China

Gasgoo.com (Shanghai) - After nearly three months of declining sales, Japanese automobile manufacturers' combined share in the Chinese passenger automobile market fell to less than ten percent in October. Despite a rebound the following month, Japanese manufacturers' sales have still not recovered to pre-September levels. Whether or not they will be able to make a full recovery is still a matter of hot debate.

In order to better understand the issue, Gasgoo.com (Chinese) conducted a week long survey on the matter, collecting opinions from 2,537 people. The results of the survey were released to the public during a press conference in Beijing at the end of November.

In the first question of the survey, participants were asked whether or not Japanese manufacturers' automobile sales had reached a minimum level in October. Half of the participants agreed with the statement, saying that sales could not decrease any further. 37 percent believe that sales will continue to decrease, while 13 percent felt that it was still too early to tell, and remained undecided.

Following escalated tensions between China and Japan over the disputed Diaoyu Islands, sales of Japanese automobiles in the country began rapidly declining in September. According to statistics from the China Association of Automobile Manufacturers, combined sales of Japanese vehicles totaled just 98,900 units in October, equivalent to negative year-on-year growth of 59.41 percent. At the same time, Japanese manufacturers' combined share in the Chinese passenger automobile market fell to just 7.61 percent in October. October marked the first time since 2009 that monthly sales of Japanese automobiles totaled less than 100,000 vehicles.

The sales decline is evidence of how large of an effect recent political tensions between the two countries have had on the business performances of Japanese enterprises in China. However, there are several observers who maintain that as long as relations between the two countries do not worsen further, anti-Japanese sentiment among the public will eventually fade, allowing sales of Japanese vehicles to recover in the upcoming months. Recent statistics seem to have confirmed this, with several manufacturers, including Nissan, Honda and Mazda, reporting sales increases from October to November.

In some regions, including Hubei's capital of Wuhan, Japanese automobile sales have already begun increasing as early as October. Several in the industry believe that these figures are all signs that Japanese manufacturers' sales in the country have begun to recover. However, there are still a number of figures in the industry that maintain that the unpredictability of Sino-Japanese relations makes it hard to forecast whether or not Japanese automobile sales will fall again in the upcoming months.

The next question expanded on the groundwork set out by the first one by asking participants when they predicted Japanese manufacturers' car sales would begin recovering. Only seven percent of respondents answered that sales have already started picking up, while 29 percent and 28 percent believed that such a recovery will occur in December or the first quarter of next year, respectively. The remaining 36 percent of respondents were unsure.

The answers to this question seem to indicate that, despite the fact that most participants believe Japanese automobile sales will not fall any further, it will still take some time before they start significantly increasing.

According to a Gasgoo Automotive Research Institute analysis co-authored by 20 industry experts, there are three key groups of consumers that Japanese automobile manufacturers have lost over the past few months. The first group is made up of potential buyers who are normally neutral to Japanese goods. These buyers have been influenced by increasing anti-Japanese sentiment throughout the country and may have ultimately chosen to buy vehicles from other manufacturers. According to the study, this group is the hardest for Japanese manufacturers to recapture. The second group consists of buyers who are slightly inclined towards Japanese vehicles. Following the rise of anti-Japanese demonstrations in the country, these buyers have begun to hesitate and delay their purchases. They may also purchase vehicles from other brands, or simply wait a few months before purchasing a Japanese vehicle. The final group is made up of purchasers who strongly prefer Japanese vehicles. This group is simply waiting for anti-Japanese sentiment to die out before making their purchases.

According to the study, the two latter group of buyers will simply wait a period of time before making their purchases of Japanese vehicles. Following this logic, it is inevitable that Japanese automobile sales will recover in the future. However, for sales to recover to pre-September levels is something that will be hard for these manufacturers to achieve in the short-term, as the first group of buyers has already been lost. Furthermore, if Sino-Japanese relations further deteriorate for whatever reason, it will take even longer for Japanese sales to recover.

In the third question of the survey, participants were asked which brand would lead the sales recovery for Japanese manufacturers. Nissan was the most selected brand, managing to gain 42 percent of the votes. It was followed by Toyota and Honda, which obtained 27 percent and 16 percent of the participants' votes, respectively. The remaining 17 percent selected the remaining Japanese brands active in the country: Mitsubishi, Mazda and Suzuki.

Nissan's primary joint venture in China, Dongfeng Nissan, is one of the country's most successful joint venture enterprises. Compared to fellow Japanese JVs, its product line up is relatively extensive, offering ten different models in various market segments. Prior to September, the New Sunny, Tiida and Qashqai were able to bring in over 10,000 orders monthly. Nissan, which is partially owned by Renault, also has a habit of promptly updating models, something several of its fully Japanese owned counterparts fail to do.

Dongfeng Nissan's own brand Venucia has been very successful in the country, managing to accumulate nearly 30,000 orders since its debut this April. Furthermore, Dongfeng Nissan has announced that it would compensate owners who had their vehicles vandalized or damaged during anti-Japanese demonstrations, helping it to retain consumer trust. Thanks to the above measures, Dongfeng Nissan dealerships saw their sales increase significantly in November, with a few dealerships reporting sales recovery rates of over 80 percent.

Finally, participants were asked if Japanese automobile sales manage to make a rebound, what levels they will be able to recover to. 17 percent of respondents answered that sales will not be able to recover to pre-September levels, while only nine percent of respondents said that sales post-recovery would meet pre-September levels. The majority of participants, 64 percent, believe that what level Japanese manufacturers' sales will recover to depends entirely on how the political relationship between Japan and China develops. The remaining ten percent were undecided.

Although China and Japan have encountered other political problems in the past, the effects of these altercations on sales of Japanese products in the country have been limited, lasting only a few months before fading away. By comparison, the recent issue is a relatively contentious territorial dispute, which has severely affected the economic interests of Japanese enterprises operating in China. It seems unlikely that the issue will fade away from the consciousness of the Chinese public any time soon.

In a similar survey conducted by Gasgoo.com (Chinese) in October, participants were asked what steps Japanese manufacturers should take to improve their status in China. The two most popular measures that participants advised these companies to take were to lobby their government to implement policies aimed at lowering Sino-Japanese tensions and doing public relations work to improve their brand image in China. Although these measures aren't directly related to the quality of Japanese manufacturers' vehicles, they would go a far way in helping them recoup their sales in the country.