Japan car giants 'to halve China output'

Nissan, Toyota and Honda act after sales slump amid islands row: Report

TOKYO - Japan's top three carmakers are halving production at their plants in China after ongoing tensions between the two countries dragged down sales, according to the influential Nikkei business daily.

The plunge in car sales is the direct result of a boycott of Japanese products sparked by the dispute between Japan and China over the Senkaku islands, which the Chinese call Diaoyu.

The car manufacturing plants reopened yesterday following the end of the week-long Chinese National Day holiday break.

Nissan Motor plans to do away with the night shift, while Toyota and Honda will shorten operating hours and run their production lines at a slower speed, Nikkei said yesterday.

Cutting production ensures that the carmakers do not run up large stocks of unsold vehicles.

Before anti-Japanese disturbances flared up last month, the three car giants produced about 10,000 vehicles a day in China through 50-50 joint ventures with local Chinese carmakers.

But Chinese consumers are said to be avoiding Japanese cars, which were damaged and even torched during the protests.

A similar call to boycott Japanese goods in 2005, following then Japanese Prime Minister Junichiro Koizumi's visit to the war-linked Yasukuni Shrine that angered the Chinese, came to nothing. But not this time.

"Although anti-Japanese demonstrations have died down since the latter part of September, there is still a very strong mood among Chinese consumers to stay away from Japanese products," said the Mainichi Shimbun daily.

If the boycott is prolonged, Japanese carmakers could be badly hurt as the Chinese market accounts for a significant share of their global sales.

For Nissan, it is 25 per cent - the highest share among Japanese carmakers. Its Guangzhou plant is the company's largest such facility in the world. The share for Toyota and Honda is 21 per cent and 16 per cent respectively.

Nissan executive vice-president Takao Katagiri told reporters last Friday that China will remain an important market for the company in the long term.

Since 2010, China has overtaken the United States as the largest car market in the world. Last year, 18.5 million new cars were sold in China, equal to 23.7 per cent of the global market.

The stakes are high for Japanese carmakers, as competition in the Chinese car market is tougher than ever before, with competing brands from the US and Europe, as well as nearby South Korea.

In fact, South Korea's Hyundai-Kia group benefited when Japanese car sales dived. It notched up its highest monthly sales figures for China, with Hyundai selling 84,188 vehicles and Kia 43,639.

"Anti-Japan sentiments in China began to affect car sales from September, and Korean carmakers were one of the beneficiaries," Bloomberg quoted Seoul-based auto analyst Eric Choi of Shinhan Investment as saying.

The slowdown in demand for Japanese cars in China has also hit the auto industry in Japan.

Toyota's plant in Kyushu, which turns out the luxury Lexus line, has cut production from 1,300 to 1,000 units a day. The Lexus is popular among the affluent in China. Production cuts in turn affect auto parts makers that supply components to the plants for final assembly.