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Detroit Makers Win Big as Toyota, Honda, Nissan Hit by Chinese Boycott

Japanese curb expectations for the near-term in China.

by on Nov.08, 2012

A Toyota dealership in Qingdao was burned by protestors in a dispute over an island chain claimed by both China and Japan.

What’s bad news for the Japanese is turning into a hugely positive development for Detroit and European automakers.  General Motors Co., Ford Motor Co. and Volkswagen AG all stand to benefit as Japanese automakers are forced to cut back on their sales and marketing efforts in the critical China market because of a political dispute over some nearly submerged islands in the East China Sea.

While Japan’s three largest automakers reported significant increases in earnings over the past weeks, they’ve also downgraded forecasts for the months ahead, and while a variety of headwinds face them, China is at the top of the list.

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“An ongoing fall in sales in China will directly influence our financial report for the second half” of the 2012 fiscal year which ends next March 31st, Nissan Motor Co. Chief Operating Officer Toshiyuki Shiga acknowledged this week.

The maker’s market share in China dipped to 6.3% between July and September, compared with 7.5% during the previous quarter. Toyota Motor Co. and Honda Motor Co. had similar problems – and see similar challenges going forward.

(For more on Nissan’s latest earnings, Click Here.)

By contrast, Ford sales in China jumped 48% in October, and GM’s rose 14%. Volkswagen also posted strong sales across China after actually leapfrogging GM for the first time in eight years.

Part of the increase for Ford is the result of an expansion of its production footprint last spring when it open a new assembly plant in central China. GM and VW also have continued to add production capacity.

However, there is no doubt U.S. and European makers are benefiting from the territorial dispute in the East China Sea that initially led to riots in a few parts of China – including one where a Toyota dealership was torched – and has now morphed into a boycott of Japanese products.

The two countries are at odds over a chain of uninhabited islands Japan nationalized in September — but which also are claimed by China.

The hostility also has triggered both violence against owners of Japanese cars leading several makers, including Toyota, to offer assistance to those who’ve seen their vehicles damaged or destroyed.

For now, while not directly trying to profit at their Japanese rivals problems, Western makers are clearly benefiting.  GM said the company and its joint ventures sold 251,812 vehicles last month in China, setting a record for October and rising 14.3% from the same month a year earlier. Through the first 10 months of this year, GM and joint ventures in China have sold 2.33 million vehicles, up 10.5% from the same time a year ago, also a record.

Ford sold 60,518 vehicles there in October, up 48% compared with the same month last year and the second consecutive monthly sales record in China.

Chrysler Group LLC does not report monthly sales totals but also is expanding in its operations in China.

Toyota’s China sales in September and October were nearly sliced in half; Nissan Motor Co. sales dropped 41% last month.

Lin Huaibin, a Shanghai-based analyst at IHS Automotive comments, “The influence on consumer mentality here could be long- lasting. This is bad news for the Japanese OEMs and very good news for the Germans and Americans.”

Compounding the initial reaction to Japan’s takeover of what the country calls the Senkoku Islands – and China refers to as the Daioyu – the timing coincided with the Japanese brutal invasion of Manchuria eight decades earlier.

Initial forecasts by Toyota, Honda and Nissan indicate they expect to see combined Chinese sales fall by at least 500,000 before the end of the fiscal year.  But Nissan’s Shiga did see things improve longer-term.

“We are gradually seeing signs of recovery (in China). Customers are gradually coming back to dealerships,” the COO said following the announcement of Nissan’s July – September earnings. Shiga claimed visitors to the company’s Chinese showrooms are now back to around 80% of the levels seen prior to the island dispute, though orders are still only running at about 70% of anticipated levels.

Paul A. Eisenstein contributed to this report.

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