Japan's carmakers and TSPs try to regain market after boycotts in China

Japanese car makers and telematics service providers are still struggling to recover lost market share one year after a territorial dispute over uninhabited islands in the East China Sea claimed by both countries triggered riots and calls for boycotts of Japanese goods across China.

After the Japanese government carried out a plan in September 2012 to purchase the uninhabited but mineral-rich Diaoyu Islands (called the Senkaku Islands in Japan) from a private owner, violent demonstrations spread out across China.

In scenes resembling Hate Week rallies from George Orwell’s “Nineteen Eighty-Four,” demonstrators hurled bricks and bottles at the Japanese embassy in Beijing and, at one point, surrounded the Japanese ambassador’s car, ripping off his flag.

In the southern city of Guangzhou, protesters overturned a Toyota belonging to the Italian consul-general, and, in the former capital Xian, they pulled a Chinese driver from his Japanese sedan and attacked him with a steel lock. Japanese businesses, including car dealerships and production facilities, were likewise assaulted.

According to Lin Huaibin, who specializes in light vehicle sales trends across China at IHS Automotive, Japanese carmakers saw their collective market share in China drop to 18.8% in the January-August period of 2013 from 23.7% they held in the corresponding period of the year before.

Their losses have been gains not only for South Korea's Hyundai but also for a number of western brands including GM, Ford and Volkswagen.

Trying recovery

Now, after laying low for a while, the Japanese are launching an array of recovery strategies, which include forming new joint ventures with Chinese partners and introducing new technologies to China, says Narita Chow, a senior analyst with the international research consultancy IHS.

Nissan, for one, is building a global design center in Beijing, while Toyota is focused on developing new hybrid models for the Chinese market at its burgeoning research center in the eastern province of Jiangsu. Over the summer, Honda launched its new CRIDER sedan, jointly developed by Japanese and Chinese designers and equipped with basic mapping services provided via a smartphone. 

New Honda models will also feature a sophisticated radar device that continuously monitors the distance from nearby vehicles and is part of a collision-avoidance system called Adaptive Cruise Control that automatically adjusts the speed of a moving vehicle to prevent accidents. Honda also aims to launch its HondaLink telematics service across China as part of its plan to introduce 12 new car models and achieve annual sales of 1.3 million units by the end of 2015.  

Social responsibility

Efforts to cultivate an image of social responsibility also appear to be helping. Nissan has been cooperating with the Beijing Municipal Commission of Transport in a cutting-edge experiment involving the use of advanced telematics systems to relieve congested traffic and cut fuel consumption and pollution levels in one district of the Chinese capital.

In the New Traffic Information System Model Project, Nissan has teamed up with Japan’s New Energy and Industrial Technology Development Organization, the Beijing Municipal Development and Reform Commission and the city’s traffic authorities to provide 12,000 cars in Beijing with telematics systems linked to the city’s intelligent transportation network.

Nissan executives described the experiment as “the world's first large-scale project to demonstrate and measure traffic dispersion effects” using telematics devices that provide drivers with real-time info on traffic patterns, along with feedback on driving behavior and fuel consumption. Initial data from the trial indicate that, if just one-tenth of all drivers in Beijing used this telematics system, travel speed throughout the city would increase by 10% and fuel consumption and CO2 emissions would be reduced by about 10%.

In July, Toyota’s research center in China partnered with the Beijing Municipal Commission of Transport on a parallel project aimed at testing cars connected via telematics to a new traffic-flow simulator designed to guide drivers, via portable devices, around the capital’s most crowded roadways. In the process, drivers are expected to cut fuel consumption and emissions of pollutants.

(For more on using telematics to combat air pollution in China, see Telematics and air pollution in China.) 

Should you blame the boycotts?

While every Japanese car manufacturer has chalked up a decline in sales across China since the East China Sea dispute last year, Japanese companies have adopted varying degrees of transparency over the connection between these drops and the recent Chinese protests and boycotts.

Toyota acknowledged the connection in an annual report this year, when it stated: “Toyota’s sales in 2012 saw a decrease for the first time, resulting in a 5% decrease compared to the previous year, due to the impact of the political conflict between Japan and China which arose in September 2012.”

But Nissan, while reporting that its sales of vehicles sold in China slipped by 5.3% to 1.18 million units over the year that ended in March, provided no mention of the Chinese demonstrations. 

Honda adopted a middle course by glossing over the protests. Although Honda’s automobile sales dropped by 3% to 599,000 units from the previous fiscal year, which ended on March 31, 2013, all that Honda’s chief executive officer, Takanobu Ito, told shareholders of the boycotts was that the drop in sales reflected “the challenging sales conditions faced by Japanese automakers in the country during the fiscal year.”

Whether any of this will actually succeed in changing the controversial public image Japan has with Chinese consumers has yet to be seen. “It is still politically risky to buy a Japanese car,” said a young Chinese government worker who is planning to purchase an automobile.  

Kevin Holden is a regular contributor to TU. 

For all the latest telematics trends, check out Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco, Consumer Telematics Show 2014 on Jan. 6 in Las Vegas, Telematics for Fleet Management Europe 2014 on March 12-13 in Amsterdam, The Netherlands, and Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany.

For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013The Automotive HMI Report 2013Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.


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