BEIJING — A year after their China sales were battered by protests in a territorial dispute, Japan’s big automakers are finding it tough to bounce back in the Chinese market.
In particular, they are struggling where demand for cars is rising fastest — in provinces where anti-Japan sentiment historically runs deepest, a legacy of Japanese occupation around World War II.
In relatively more Japan-friendly parts of southern China like Guangdong, Toyota Motor, Nissan Motor and Honda Motor are returning to sales levels near those seen before a diplomatic row last September over a group of rocky, uninhabited islets in the sea between China and Japan.
A tougher challenge for the Japanese brands are the coastal and northeastern provinces like Shandong, which overtook Guangdong as China’s biggest car market in 2009, Zhejiang and Jiangsu — part of a large swathe of the country that Japan invaded and occupied during the late 1930s.
Over the past decade, Japanese automakers set up a strong base in Guangdong, investing heavily in factories that now form an assembly cluster fed by Japanese parts suppliers in the area.
In relatively more Japan-friendly parts of southern China like Guangdong, Toyota Motor, Nissan Motor and Honda Motor are returning to sales levels near those seen before a diplomatic row last September over a group of rocky, uninhabited islets in the sea between China and Japan.
A tougher challenge for the Japanese brands are the coastal and northeastern provinces like Shandong, which overtook Guangdong as China’s biggest car market in 2009, Zhejiang and Jiangsu — part of a large swathe of the country that Japan invaded and occupied during the late 1930s.
Over the past decade, Japanese automakers set up a strong base in Guangdong, investing heavily in factories that now form an assembly cluster fed by Japanese parts suppliers in the area.
According to R.L. Polk & Company, an industry consultant, Japanese cars had 41 percent of the market in Guangdong in 2011, though that share has dipped a few percentage points since the dispute last year.
But northern and eastern provinces are now eclipsing Guangdong in car demand.
But northern and eastern provinces are now eclipsing Guangdong in car demand.
Polk said Guangdong had been overtaken by Shandong and Jiangsu, and its ranking as third was under threat from Zhejiang and Hebei, which also were occupied by Japan more than 70 years ago.
“It’s a smoldering brush fire today but could turn into a big five-alarm fire if Japanese automakers don’t deal with it,” said Yale Zhang, head of Automotive Foresight, a consultant based in Shanghai.
“It’s a smoldering brush fire today but could turn into a big five-alarm fire if Japanese automakers don’t deal with it,” said Yale Zhang, head of Automotive Foresight, a consultant based in Shanghai.
“As demand in mega-markets like Beijing slows significantly, Toyota and other Japanese brands need to penetrate even deeper into the Chinese market.”
Protests erupted across China a year ago after Japan nationalized some of the Senkaku islets by buying them from a private owner.
Protests erupted across China a year ago after Japan nationalized some of the Senkaku islets by buying them from a private owner.
As passions ran high, thousands of Japanese-branded cars were vandalized, and dealerships were attacked by mobs in Qingdao, a major city in Shandong, as well as in other cities.
In a widely reported incident in mid-September last year, a 51-year-old Chinese man with his family drove his Toyota Corolla past an anti-Japanese demonstration in Xi'an in Shaanxi Province.
In a widely reported incident in mid-September last year, a 51-year-old Chinese man with his family drove his Toyota Corolla past an anti-Japanese demonstration in Xi'an in Shaanxi Province.
The car was surrounded by protesters and the man was so badly beaten that he was partly paralyzed, and his car destroyed.
Sales of Japanese-branded cars plunged by more than half in September and October from year-earlier levels and remained weak well into the first half of this year.
Though sales of Japanese cars are picking up in the south and southeast, sales executives said recovery was frustratingly slow farther north in Jiangsu, Anhui and Shaanxi.
Sales of Japanese-branded cars plunged by more than half in September and October from year-earlier levels and remained weak well into the first half of this year.
Though sales of Japanese cars are picking up in the south and southeast, sales executives said recovery was frustratingly slow farther north in Jiangsu, Anhui and Shaanxi.
A Nissan sales executive based in Guangzhou said the attack on the driver in Xi'an had been especially damaging, as it had scared Chinese buyers away from Japanese cars.
“Recovery in Shaanxi is the slowest for us,” the executive said, asking not to be named because business was still sensitive to the issue.
“We also have to deal with negative campaigns by dealers representing Western brands,” he said, referring to some local dealers who tell customers it is unpatriotic or unsafe to own a Japanese car in China.
Song Fangjie, a 28-year-old construction supervisor from Jinan, Shandong’s provincial capital, said he liked Japanese cars’ fuel economy, but had chosen a Volkswagen for its safety.
“We also have to deal with negative campaigns by dealers representing Western brands,” he said, referring to some local dealers who tell customers it is unpatriotic or unsafe to own a Japanese car in China.
Song Fangjie, a 28-year-old construction supervisor from Jinan, Shandong’s provincial capital, said he liked Japanese cars’ fuel economy, but had chosen a Volkswagen for its safety.
“If Japanese carmakers offer better service, I might think about buying one,” he said, though he recounted how a friend had been refused service at a gasoline station because he was driving a Japanese car.
At Toyota, some executives question whether it is wise to pour resources into competition in these hostile markets.
“I think we’re much better off focusing on more friendly southern China at this point,” said one senior Toyota sales and marketing executive, though he added that the company had yet to decide on its approach.
At Toyota, some executives question whether it is wise to pour resources into competition in these hostile markets.
“I think we’re much better off focusing on more friendly southern China at this point,” said one senior Toyota sales and marketing executive, though he added that the company had yet to decide on its approach.
He stressed that dealer location was not a factor in allocating new vehicles and providing marketing support, but he said South China would be a better testing ground for new marketing programs, like maker-certified used cars and vehicle-leasing.
Takanori Yokoi, a spokesman for Toyota based in Beijing, said the company was focusing on the tougher, faster-growth provinces, rather than avoiding them.
Takanori Yokoi, a spokesman for Toyota based in Beijing, said the company was focusing on the tougher, faster-growth provinces, rather than avoiding them.
He noted the opening of a Toyota China branch this year in Nanjing, Jiangsu’s capital and the site of a massacre under Japanese occupation in 1937.
Toyota has also opened a technical center in Changshu, east of Nanjing.
Yang Liaoliao, a 25-year-old bank accountant from Qingdao, the home of Tsingtao beer in eastern Shandong, said she had chosen a German car.
Yang Liaoliao, a 25-year-old bank accountant from Qingdao, the home of Tsingtao beer in eastern Shandong, said she had chosen a German car.
“I read reports and saw experiments online saying that Japanese carmakers save materials to make their cars lighter, so they’re maybe not as safe.”
“Unlike people in big cities like Shanghai or Beijing, we’re more influenced by traditional Confucian culture, which makes us more conservative,” she said.
“Unlike people in big cities like Shanghai or Beijing, we’re more influenced by traditional Confucian culture, which makes us more conservative,” she said.
“When it comes to buying expensive items like cars, anti-Japanese sentiment won’t play a big role.”
Toshiaki Mikoshiba, president of Honda’s joint venture in China with Guangzhou Automobile Group Company, acknowledged the importance of the emerging provinces, but said his firm was not taking specific steps to take on the challenge.
“Our cars are based on Honda’s technology, but are made and sold by Chinese people here in China,” he said at a news conference in Shanghai last week.
Toshiaki Mikoshiba, president of Honda’s joint venture in China with Guangzhou Automobile Group Company, acknowledged the importance of the emerging provinces, but said his firm was not taking specific steps to take on the challenge.
“Our cars are based on Honda’s technology, but are made and sold by Chinese people here in China,” he said at a news conference in Shanghai last week.
“We’ve planted our roots in China. We would like the people to understand our steady efforts.”
Nissan is pushing aggressively into “tough” provinces like Shandong and Jiangsu with its “100 Cities” project — an initiative it began in 2011 to raise its presence in about 130 smaller cities across China.
Nissan is pushing aggressively into “tough” provinces like Shandong and Jiangsu with its “100 Cities” project — an initiative it began in 2011 to raise its presence in about 130 smaller cities across China.
Nissan estimates about a fifth of the revenue from those cities comes from Shandong and neighboring Hebei.
As part of the program, Nissan takes an auto show to rural cities on a big trailer, offering customers who have no Nissan dealer nearby a chance to learn about its vehicles and technologies and to test drive new models.
As part of the program, Nissan takes an auto show to rural cities on a big trailer, offering customers who have no Nissan dealer nearby a chance to learn about its vehicles and technologies and to test drive new models.
About 3,000 such road shows are planned a year.
Late last year, the company also began allowing prospective buyers to drive Nissan rental cars — many of its dealers operate rental businesses — for as long as two days for free, if they eventually chose to buy a Nissan model.
Nissan also said it would offer compensation of as much as 200,000 renminbi, or $32,700, to cover any injuries to people in Nissan cars resulting from anti-Japanese sentiment, as well as repair or replacement of any of its cars damaged in protests.
Late last year, the company also began allowing prospective buyers to drive Nissan rental cars — many of its dealers operate rental businesses — for as long as two days for free, if they eventually chose to buy a Nissan model.
Nissan also said it would offer compensation of as much as 200,000 renminbi, or $32,700, to cover any injuries to people in Nissan cars resulting from anti-Japanese sentiment, as well as repair or replacement of any of its cars damaged in protests.
Nissan has stepped up those efforts this year as it has sought to regain footholds in China, the executive said, noting that demand for Nissan cars in Shandong, for example, is at 95 percent of pre-crisis volumes.
“Shandong and those other provinces are tough markets, but we have objectives and can’t turn away from it,” the executive said, referring to Nissan’s midterm plan to sell two million vehicles a year in China by 2016, up from 1.18 million last year.
“Shandong and those other provinces are tough markets, but we have objectives and can’t turn away from it,” the executive said, referring to Nissan’s midterm plan to sell two million vehicles a year in China by 2016, up from 1.18 million last year.
“We can’t keep relying on South China.”
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