In China, car buyers' savvy may be Japanese brands' salvation

GUANGZHOU/BEIJING Thu Nov 22, 2012 4:56am EST

1 of 5. A worker cleans next to a Toyota NS4 plug-in hybrid concept car during the media preview of the 10th China International Automobile Exhibition in Guangzhou November 22, 2012. The auto show opens to the public from November 22 to December 2.

Credit: Reuters/Tyrone Siu

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GUANGZHOU/BEIJING (Reuters) - China's car buyers are growing up - with a more discerning view on the bang they want for their buck - and that could help Japanese automakers recover in a market where sales have been battered in protests over disputed East China Sea islets.

While Nissan Motor Co (7201.T), Honda Motor Co (7267.T), Toyota Motor Corp (7203.T) and Mazda Motor Corp (7261.T) count the cost of lost sales and dented profits from a violent anti-Japanese backlash in September, industry experts say now is the time to strike deeper into the world's biggest autos market rather than limp away and lick their wounds.

Paul Gao, a Hong Kong-based researcher at U.S. consultant McKinsey & Co, said the damage to Japanese brands should prove to be a "temporary phenomenon" as tensions were heightened in the run-up to this month's 18th Communist Party Congress - China's once-in-a-decade leadership change.

"Over the medium- to long-term, the Japanese (market) share in China will recover because for customers, especially those buying cars with their own money ... the nationality of the brand is not a major consideration, whether it's Japanese, Korean, whatever. In the end, they think about performance, styling, fuel economy and safety," Gao said, adding it would be a mistake for the Japanese to shift focus away from China.

He said the Japanese should now be "doubling their efforts" to win back China market share from Volkswagen (VOWG_p.DE), General Motors (GM.N) and Hyundai Motor (005380.KS), as more drivers are now getting around to replacing their cars.

"For their first car, as they had no ownership experience, they gravitated towards flashy cars and were impressed by advertising and sales campaigns. Now they are looking for something more rational - quality, safety, durability - areas where Japanese brands like Toyota excel," he said.

Demand for leading Japanese car brands in China virtually halved last month, cutting Japanese firms' market share to 17 percent from 19 percent at end-August.

MARKETING SWITCH

Blaming the China impact, Nissan - the most exposed of the three big Japanese automakers to China - cut its full-year net profit forecast by a fifth, while Honda also revised down its forecasts for the year by 20 percent. Toyota, also badly hit in China, managed to increase its annual profit forecast as it is less exposed to that market. China accounts for 27 percent of Nissan's total vehicle sales, a fifth of Honda's sales and 12 percent of Toyota's global sales.

Mazda said on Thursday it expects its China car sales to fall by more than a third this month from a year earlier, dragging fourth-quarter sales down by around 40 percent, but the firm's China chief, Noriaki Yamada, hoped China would be back to 'business as usual' by the end of March.

Speaking on the sidelines of the Guangzhou autoshow in southeastern China, the first major industry event since the anti-Japanese protests, Yamada said Mazda was also changing tack on the way it markets its brand in China - preferring a more direct and personal touch than traditional mass media advertising.

"We need to increase the opportunities where we and our customers can directly interact," he told reporters, noting Mazda would invite more potential buyers to test drive its cars, take part in more of China's local auto shows and further expand its dealership network. "We think it's better to allocate our budget on these events rather than on advertising."

COMPENSATION

In a bid to win back the hearts and wallets of Chinese drivers weeks after Tokyo's nationalization of two islets - known to Chinese as the Diaoyu and to Japanese as the Senkaku - Japan's carmakers have compensated car owners and dealers for damage and injuries incurred during the protests - though this has been a low-key campaign as they don't want to invite a flood of unrelated claims. None of the carmakers has said how many cases are involved or how much they expect to pay out.

"We need to shoulder responsibility if they face challenges," Ren Yong, vice president of Nissan's local joint venture with Dongfeng Automobile Co Ltd (600081.SS), told reporters at the Guangzhou event. The venture said it will offer a new car to buyers returning a vehicle over a quality issue - within 7 days of purchase and with mileage below 1,000 km.

While recovery in China will be helped by a softening yen - the Japanese currency has weakened to 82 to the dollar from around 77.5 in late-September, making exports more competitive - it could be the Japanese firms' quality, value-for-money and cost management that seal the recuperation.

"Japanese firms may not produce the most eye-catching products or brand marketing campaigns, but they invest in the long-term relationship with suppliers to improve the cost structure and improve the quality. This is what Americans and Germans don't do that well," said McKinsey's Gao.

(Additional reporting by Fang Yan in Shanghai and Yoko Kubota in Tokyo; Editing by Ian Geoghegan)

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Comments (3)
Janeallen wrote:
What rubbish Japanese propaganda!
Ask the U.S. paratrooper’s entire family who died in San Diego, due to the defect in Prius, that caused the car to self-acceleration and not respond to braking— based on recordings on 911 call before the entire family died! If Toyota had reported previous reports of perceived self-acceleration by many Prius owners in accordance to American law, regardless of what the real cause of the accident that many believe Toyota is hiding, that family and others would not have died.

Ask the Asian American family whose Toyota self-accelerated, and the father was wrongfully placed in jail for a LONG time, until the judge acquitted him based on evidence that the Toyota self-accelerated. Did Toyota care about the suffering, the emotional trauma that family underwent? No. Of Course. They are non-Japanese Asian Americans.

I bought Toyotas in the 1980s and 1990s, and count myself as VERY LUCY to not have bought a Prius when it cheated so many California tax payers by negotiation obscene amount of tax breaks, and then left Californian auto workers from Nummi stranded as soon as the economic climate shifted.

This Reuters piece is another piece of evidence Reuters has been bribed by Japan? So many find egregious distortion, of reports of facts and history regarding to Japan, Japanese products and Japanese history! Geeze. Does anybody believe in anything Reuters write about any more?

Nov 23, 2012 2:24pm EST  --  Report as abuse
jo5319 wrote:
Yeah right! There have been more recalls, from the floor mats to other parts by Toyotas, Hondas!

Savvy buyers won’t buy Japanese. All the scandals of corruption of big corporation, make it the most non-transparent companies and over-rated product.

Any the whistle-blowers in Japanese companies get fired, particularly if they are not Japanese. Ask Michael Woodford about Olympus. Their books are all fixed. All their CEOs are Japanese, who hide the facts from the international investors– that’s a lot more common than just one Olympus case. Everybody in the world knows that. And Reuters reporters want to turn the facts upside down in the reports!

What Reuters did in the past few months are coming out as a scandal in itself! Reuters will be punished for egregiously misleading consumers, with reckless disregard of potential harm to human lives, not just getting a raw business deal from all this whitewashing.

Nov 23, 2012 2:31pm EST  --  Report as abuse
Janeallen wrote:
Signs that the Reuters censors are bribed by Japan again.

Deaths caused by delay of fixing Prius is censured.

I bought Toyotas in the 1980s and 90s, and will never buy Toyota again, despite watching all the Toyota sponsored reportes on CBS, ABC, NBC, CBS and every major American news network. That’s the truth; and Reuters is bribed to whitewash how Toyota is fined for not acting quickly, and illegally, not reporting an unusual spike of Prius accidents! What savvy car buyer should buy Toyota again!
Yet THOSE FACTS ARE CENSURED.

Nov 23, 2012 5:21pm EST  --  Report as abuse
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