GUANGZHOU/BEIJING Nov 22 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, Honda Motor Co,
Toyota Motor Corp and Mazda Motor Corp 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,
General Motors and Hyundai Motor, 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.
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
"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."
In a bid to win back the hearts and wallets of Chinese
drivers weeks after Tokyo's nationalisation 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, 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.