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Japanese car strategy needs a retuning
By Lu Nengneng |
October 24, 2012, Wednesday
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Print Edition
Print Edition
IT is time for Japanese carmakers to take a good hard look at themselves to see what's going wrong with their China business strategy instead of just letting the recent anti-Japanese sentiment take all the blame.
Following the recent escalation of Sino-Japanese tensions over the disputed Diaoyu Islands, calls for boycotts of Japanese goods across China sent Japanese car sales into freefall - from a 2 percent year-on-year decrease in August to a 40 percent plunge in September, according to the China Association of Automobile Manufacturers.
The demand disruption is sending shockwaves through car production in China, with many plants cutting shifts. Two of the three Toyota production lines in China's northern city of Tianjin were closed for a whole week.
All those ramifications lead Japanese carmakers to one conclusion: they are at risk of losing their market leadership in China for the first time since 2005, when they overtook German rivals for honor.
Coincidentally perhaps, 2005 also saw a nationwide anti-Japanese protest amid diplomatic tensions. But questions arise about just how much influence such calls for boycotts really have on sales. Many analysts think the impact is pretty negligible.
If so, is it possible that Japanese cars are simply falling out of favor - political disputes notwithstanding?
The market share of Japanese cars in China has sunk from a 2008 peak of 30.8 percent down to little more than 20 percent last month, according to the carmakers' association.
Japanese car sales in China peaked in 2009. But they were hit by a series of quality scandals both in China and across the world, led by the global recall of more than 10 million Toyotas.
That was no idle stroke of bad luck. According to data compiled by Chinese media, the three biggest Japanese carmakers - Toyota, Nissan and Honda - accounted for more than 80 percent of all cars recalled for defects since 2010. Earlier this month, Toyota initiated the biggest single worldwide recall since 1996.
Safety concerns
Reliability and safety are non-negotiable expectations for car purchasers. Those massive recalls have undoubtedly undermined the once unassailable notion that Japanese vehicles were the best built on the road. According to J.D. Power Asia Pacific, the percentage of Chinese consumers who say they intend to purchase a new Japanese vehicle dropped from 32 percent in 2009 to 24 percent this year. The latest result even came from a survey conducted in February and March, long before the boycotts began.
But quality concerns are not the only reason why Chinese consumers are walking away from Japanese cars and taking their money elsewhere.
After following the well-worn path of research and development all those years, Japanese carmakers seem to have lost their magic touch.
The focus has been on improving existing technologies instead of pioneering new innovations. Japanese carmakers have brought next to nothing new to the Chinese market in the last five years, except upgrades and revamps of their hottest-selling older models.
Apparently, Japanese carmakers haven't noticed that Chinese consumers are becoming more sophisticated and foreign rivals are leading the way in bolder engineering and styling.
The biggest competition comes from German carmakers, who keep promoting new concepts for cars, such as minivans and wagons, and who are bringing their most advanced technologies for engines and transmissions here for localized production.
The China Passenger Car Association said earlier this month that Germany may replace Japan as the biggest seller of foreign cars in China this year if geopolitical disputes between China and Japan do not subside.
For Japanese carmakers, waging a price war is not the right way to retrieving lost ground while waiting for anti-Japanese sentiment to wear off.
On the plus side, it is heartening to see that Japanese carmakers made the sensible decision to offer trade-in services, free repair and compensation for people whose Japanese vehicles were damaged or destroyed during the recent outbreak of violent protests. It is high time for them to show customers that they care.
The upcoming Guangzhou Auto Show in southern China will be a chance for Japanese carmakers to resume their suspended marketing campaign and maybe recoup some showroom traffic.
But in the end, redemption won't come easy. Japanese carmakers will need to rebuild a more trustworthy image and offer more attractive cars if they want to woo customers back.
Following the recent escalation of Sino-Japanese tensions over the disputed Diaoyu Islands, calls for boycotts of Japanese goods across China sent Japanese car sales into freefall - from a 2 percent year-on-year decrease in August to a 40 percent plunge in September, according to the China Association of Automobile Manufacturers.
The demand disruption is sending shockwaves through car production in China, with many plants cutting shifts. Two of the three Toyota production lines in China's northern city of Tianjin were closed for a whole week.
All those ramifications lead Japanese carmakers to one conclusion: they are at risk of losing their market leadership in China for the first time since 2005, when they overtook German rivals for honor.
Coincidentally perhaps, 2005 also saw a nationwide anti-Japanese protest amid diplomatic tensions. But questions arise about just how much influence such calls for boycotts really have on sales. Many analysts think the impact is pretty negligible.
If so, is it possible that Japanese cars are simply falling out of favor - political disputes notwithstanding?
The market share of Japanese cars in China has sunk from a 2008 peak of 30.8 percent down to little more than 20 percent last month, according to the carmakers' association.
Japanese car sales in China peaked in 2009. But they were hit by a series of quality scandals both in China and across the world, led by the global recall of more than 10 million Toyotas.
That was no idle stroke of bad luck. According to data compiled by Chinese media, the three biggest Japanese carmakers - Toyota, Nissan and Honda - accounted for more than 80 percent of all cars recalled for defects since 2010. Earlier this month, Toyota initiated the biggest single worldwide recall since 1996.
Safety concerns
Reliability and safety are non-negotiable expectations for car purchasers. Those massive recalls have undoubtedly undermined the once unassailable notion that Japanese vehicles were the best built on the road. According to J.D. Power Asia Pacific, the percentage of Chinese consumers who say they intend to purchase a new Japanese vehicle dropped from 32 percent in 2009 to 24 percent this year. The latest result even came from a survey conducted in February and March, long before the boycotts began.
But quality concerns are not the only reason why Chinese consumers are walking away from Japanese cars and taking their money elsewhere.
After following the well-worn path of research and development all those years, Japanese carmakers seem to have lost their magic touch.
The focus has been on improving existing technologies instead of pioneering new innovations. Japanese carmakers have brought next to nothing new to the Chinese market in the last five years, except upgrades and revamps of their hottest-selling older models.
Apparently, Japanese carmakers haven't noticed that Chinese consumers are becoming more sophisticated and foreign rivals are leading the way in bolder engineering and styling.
The biggest competition comes from German carmakers, who keep promoting new concepts for cars, such as minivans and wagons, and who are bringing their most advanced technologies for engines and transmissions here for localized production.
The China Passenger Car Association said earlier this month that Germany may replace Japan as the biggest seller of foreign cars in China this year if geopolitical disputes between China and Japan do not subside.
For Japanese carmakers, waging a price war is not the right way to retrieving lost ground while waiting for anti-Japanese sentiment to wear off.
On the plus side, it is heartening to see that Japanese carmakers made the sensible decision to offer trade-in services, free repair and compensation for people whose Japanese vehicles were damaged or destroyed during the recent outbreak of violent protests. It is high time for them to show customers that they care.
The upcoming Guangzhou Auto Show in southern China will be a chance for Japanese carmakers to resume their suspended marketing campaign and maybe recoup some showroom traffic.
But in the end, redemption won't come easy. Japanese carmakers will need to rebuild a more trustworthy image and offer more attractive cars if they want to woo customers back.
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