Fitch: Robust China Growth for Japanese Autos, but Risks Remain

Tue Aug 5, 2014 9:46pm EDT

(The following statement was released by the rating agency) SINGAPORE, August 05 (Fitch) The top three Japanese automakers - Toyota, Honda and Nissan - continue to enjoy robust volume growth in China, regaining some of the market share they lost following a political dispute between Japan and China over the sovereignty of the Senkaku/Diaoyu islands in September 2012. However, Fitch Ratings expects heightened competition from other international automakers which dominate the world's largest car market, to contribute to a slowing of sales momentum in 2H14. We expect the popularity of existing and new models to support solid growth in sales volumes for Japanese manufacturers in 2H14. That said, fierce competition remains from market leaders such as Volkswagen and General Motors, as well as from Ford and Hyundai. The major European, Korean and US automakers continue to expand their presence in China to capitalise on strong long-term growth prospects. In the first half of this year, China's passenger car market grew to 9.6 million units, up 11.2% year-on-year. Nissan's sales volume outpaced the market, up by 14% and increasing its market share to around 6%, while Toyota and Honda maintained their market shares of around 5% and 4%, respectively. Fitch expects the double-digit growth in China's passenger car market to moderate in the second half to the mid-to-high-single digits, as Chinese economic expansion slows. Regulatory factors could further temper market growth, such as more stringent environmental legislation, while government policies to promote the purchase of domestic brands could curb some demand for foreign marques. Nevertheless, we expect passenger car demand in China to remain solid over the medium term. Japanese automakers face the additional geopolitical risk of a rise in tension between China and Japan. Vehicle sales plummeted by the double digits for Toyota, Nissan and Honda following the 2012 islands dispute, as violent demonstrations against Japanese automakers and dealerships forced a temporary halt in production. The unresolved, underlying political issues mean that the risk remains of a repeat of the 2012 events - and subsequent loss of sales. Contact: Isabelle Katsumata Director Corporates +65 6796 7226 Fitch Ratings Singapore Pte Ltd 6 Temasek Boulevard #35-05 Suntec Tower 4 Singapore 038986 Justin Patrie Senior Director Fitch Wire +65 6796 7232 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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