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Japanese carmakers still facing uphill task in China

Publication Date : 21-07-2014

 

The market share for Japanese carmakers in China has recovered slightly from the low point it hit two years ago in the wake of a diplomatic row.

According to statistics from automotive news portal auto.gasgoo.com, Japanese brands sold about 1.46 million cars in the first half, up 15.5 per cent from the same period last year.

They had a combined market share of 16.5 per cent in the first half, a slight increase from the 16.4 per cent in the past two years.

In June alone, Japanese carmakers sold more than 270,000 cars in China, about 17.3 per cent of the total passenger vehicle sales that month.

Despite some ups and downs over the past six months, by June their market share had increased nearly 4 percentage points over January.

Nissan, Toyota, Honda, Suzuki and Mazda all reported a year-on-year increase of more than 10 per cent in the first six months.

Nissan, currently the best-selling Japanese brand in China, moved about 620,000 vehicles in the first half, an increase of 14.6 per cent over the same period last year.

Toyota sold nearly 466,000 vehicles in the period, up 11.7 per cent from a year earlier.

First half sales by Honda rose 11.6 per cent to some 353,000 units.

In the same period, Suzuki's sales grew by 11.5 per cent to nearly 140,000 units and Mazda sales surged by 19.8 per cent to 98,900 units.

New approach

Analysts said a new product offensive helped Japanese brands reverse the downward trend.

Honda introduced a brand-new model tailored for the Chinese market the Crider last year and brought the new Fit and Crosstour this year. Toyota launched the new-generation Corolla recently as well as its sporty Levin model.

Auto industry analyst Zhang Zhiyong said that Japanese carmakers are learning from competitors Volkswagen and Hyundai to accelerate introduction of new products.

Volkswagen and Hyundai both developed a number of new variants based on the same model, a strategy that proved to be very successful in China because local customers are keen on new products, Zhang said.

Yet Japanese carmakers are unlikely to return to their former status as the market leaders in China that they held before 2012, analysts said.

Japanese carmakers jointly held a market share of 19.4 per cent in 2011. At their peak in 2008, they had more than 30 per cent.

Amid fierce competition, Japanese brands have lost the advantage in important segments like mid-sized sedans and SUVs where they used to lead, said Zhu Bin, a senior market analyst of LMC Automotive.

Major competitors such as Volkswagen are also making inroads into the southern market traditionally dominated by Japanese carmakers, he said.

Zhu noted that Japanese brands are not in a position to launch a large-scale counter attack at the moment, so they can only work to defend their current share by doing a good job in compact and small car segments.

In addition, "fluctuating Sino-Japanese relations will continue to affect Japanese brands", he said.

Their German counterparts clearly enjoy a better relationship with the Chinese government.

During German Chancellor Angela Merkel's recent trip to China, German carmaker Volkswagen and its local partner FAW signed a joint declaration to build new vehicle plants in Qingdao and Tianjin.

China and Germany signed an agreement earlier this month to use the same charging standard for electric vehicles in hopes of boosting development of the market for new-energy cars in the two countries.

Hybrid vehicles

Some Japanese carmakers expect to make a breakthrough by localizing the production of gasoline-electric hybrid vehicles and key parts.

Toyota is currently producing the Prius and a hybrid version of the Camry in China but the core parts are imported.

It started an R&D center in Changshu, Jiangsu province in 2013 to prepare for local production of hybrid powertrains next year that will lower the price.

Though it currently only sells imported hybrid models in China, Honda also plans to begin domestic production of shybrid Accord, Vezel and Fit models at its local plants in two years.

Unlike the European carmakers that focus on plugin hybrids and pure electric cars, Japanese carmakers are making a big bet on gasoline hybrid vehicles.

Those are still fueled by gasoline with electric motors as auxiliary power, while plug-in hybrids use a combustion engine only to recharge batteries.

The current industrial policies in China offer no essential support for the development of hybrid vehicles in which Japanese carmakers have an edge. Instead, plug-in hybrid and pure electric cars are eligible for many incentives and subsidies.

The latest example is a sales tax exemption for all electric cars, plug-in hybrids and fuel-cell vehicles from Sept 1 this year to the end of 2017, according to a recent announcement by State Council.

Gasoline hybrid vehicles are not included.

Zhu with the LMC Automotive forecast that in the next two to three years, plug-in hybrids will have faster sales growth than traditionally powered hybrid vehicles.

He said his view is that market demand for gasoline hybrids will not be as high as expected by Japanese carmakers.

 

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