Japan carmakers face $250 million in lost China output

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Japan carmakers face $250 million in lost China output

Postby azi malik on Tue Sep 25, 2012 9:31 am

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TOKYO (Reuters) - Japanese automakers, led by Nissan Motor Co , have lost an estimated $250 million in output because of anti-Japan protests in China this week and now face the risk that sales will sputter in the world's largest car market.

Chinese protesters took to the streets this week in response to an escalating dispute with Japan over ownership of a group of isles in the East China Sea, prompting Japanese automakers including Toyota Motor Corp , Honda Motor Co and Nissan to temporarily halt operations at plants in China.

Lost production volume from those suspensions amounted to around 14,000 vehicles as of Thursday, according to an estimate by IHS Automotive. That would mean immediate lost revenue of about $250 million, based on an average vehicle sticker price of about $18,000 for the Japanese brands.

That toll could rise. Toyota said some of its China plants are still suspended, without specifying. Honda also has two factories halted, while Nissan has resumed operations.

Nissan has been the most successful Japanese automaker in China, and is most exposed now. Its projected sales in China account for 27 percent of its global sales volume, compared with 18 percent for Honda and 11 percent for Toyota.

Industry executives and analysts said automakers would be able to make up for lost output by running more overtime.

"What is more important is how consumers will react from now on," said Koichi Sugimoto, a senior analyst at BHP Paribas. "It wouldn't be strange if some people start thinking that it's better to buy South Korean cars then Japanese ones so that their cars won't be destroyed by demonstrators."

Moody's credit rating agency said it was hard to predict how "rising anti-Japanese sentiment" would affect business.

"The possible implications - in an extreme and unanticipated scenario - could include the loss of access to a significant and growing market ... or a reduction in the ability of Japanese manufacturers to locate facilities in China."


With immediately recognizable logos, Japanese cars became a target of havoc for anti-Japan protesters in China. Protesters burned a Toyota dealership in Qingdao and several more dealerships suffered damage, a company spokesman said.

A Honda dealership in Beijing sent out text messages warning customers to be careful. Photos circulated online of Japanese cars carrying banners such as "Car is Japanese, Mind is Chinese" and "From now on, I will boycott Japanese goods".

Some Japanese companies are coming up with contingency plans in case tension escalates. Brake supplier Akebono Brake Industry is preparing contingency plans in case it faces problems in importing materials needed to supply automakers in China, the company's CEO told Reuters on Thursday.

Japanese firms lag rivals General Motors Co and Volkswagen in China but remain keen on expansion.

Toyota aims to double sales in China to 1.8 million cars by 2015. Akio Toyoda, the president of Toyota, said Chinese consumers would recognize the contributions of Japanese automakers and their Chinese partners to the Chinese economy.

"I hope the problem will be resolved soon so that Japanese cars will be back on shopping lists," he told reporters.

For its part, Nissan plans to boost sales in China to 2.3 million vehicles in 2015 and has launched the made-in-China brand name Venucia together with its joint venture partner Dongfeng Motor Group Co .

Reflecting market worries about the fallout, Nissan's Credit Default Swaps have been rising all week and hit a six-week high on Thursday.

Sales in China's auto market grew sharply in 2009 and 2010, but growth fell to 5.2 percent in 2011. Sales are up 4 percent in 2012 so far.

The Toyota Camry, Nissan Teana and Honda Accord represent three of the top five selling mid-size cars in China.

While the current tension may create an opening for brands like Hyundai , auto market share is unlikely to shift much as long as Beijing moves to contain the protests, said Michael Dunne, a Hong Kong-based auto consultant.

"It's a secret to no one that there is a certain animosity that Chinese people feel to Japan for historical reasons. At the same time, it has not stopped them from buying millions of Japanese cars," he said. "As much as they love their flag, they love their money more."

source:Chicago Tribune
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