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Protests to Hurt Japan Car Sales in China, Dealer Group Says

September 17, 2012

Disputed Islands With 45 Years of Oil Split China, Japan

Anti-Japanese protesters are confronted by police as they demonstrate over the disputed islands, known as Diaoyu in Chinese and Senkaku in Japanese, in Shenzhen, China. Photographer: Lam Yik Fei/Getty Images

Violent anti-Japan protests that erupted in China over the weekend may cause more damage to Japanese automakers in the world’s largest vehicle market than natural disasters last year, according to the state-backed dealership group.

Many dealerships in China that sell Japanese cars have shut for now after some outlets were attacked and vandalized, according to Luo Lei, deputy secretary general of the China Automobile Dealers Association. Besides those boycotting Japanese goods, most Chinese citizens won’t dare to buy Japanese-brand cars due to concerns over safety, Luo said.

“The impact caused by natural disasters can be fixed quickly, while it takes a longer time and efforts to make hostile sentiment against Japanese cars go away,” Luo said in a phone interview today, declining to quantify the damage as losses are still being tallied. “I have worked at the association for 10 years and this round of losses suffered by Japanese car dealers is the worst I’ve seen.”

A territorial dispute between China and Japan worsened as thousands protested in Chinese cities over the weekend in the worst flare-up of tensions between Asia’s two largest economies since 2005. Toyota Motor Corp. (7203) and Honda Motor Co. each reported damage to a dealership in Qingdao from fire, a Honda Civic sedan was set ablaze in front of a Shanghai distributor, while demonstrators handed out flyers listing names of Japanese brands to boycott.

Bilateral Tensions

“The longer the conflict between China and Japan lasts, the more this anti-Japanese sentiment will spread among ordinary consumers,” said Klaus Paur, Shanghai-based global head of automotive at researcher Ipsos. “In this politically sensitive situation, Japanese manufacturers have to reduce marketing as well as communication activities, which in turn, significantly weakens their brands and leaves the field for competitors.”

Still, a solution to the bilateral tensions may be found soon as neither Japan nor China are really interested in a serious conflict, which means Japanese brands in China can avoid long-term damage, he said.

Joint Ventures

Dongfeng Motor Group Co. (489), the Chinese partner of Nissan and Honda, dropped 7 percent in Hong Kong, the biggest decline in 11 months. Guangzhou Automobile Group Co. (2238), which has joint ventures making cars with Toyota and Honda, sank 4.6 percent.

Natsuno Asanuma, general manager of Honda’s China unit, said a dealership in the city of Qingdao was set ablaze by protestors on Sept. 15. No injuries resulted from the fire. Joichi Tachikawa, a Toyota spokesman, said today there were no other reports of major damage in China to its operations besides the fire over the weekend at a dealership, also in Qingdao.

In southern Guangzhou city, seven suspects were detained for vandalizing a Japanese brand car on Sept. 16, according to a statement posted on the local public security bureau’s website. Police also detained three others for smashing an unidentified store front and another person for destroying two billboards, according to the statement.

Over the weekend, Japanese cars were overturned and window shields smashed by demonstrators in some cities, according to Phoenix Television.

Toyota and Honda spokespeople in China said today they were unaware of any plans to halt production or close operations tomorrow. A Nissan Motor Co. (7201) spokesperson in Beijing said the company is discussing whether to give employees in the capital a day off tomorrow or allow them to work from home.

Mukden Incident

September 18 is the anniversary of the Mukden Incident, also known as the Manchurian Incident, which took place in 1931 near what is now the Chinese city of Shenyang and led to the Japanese invasion of the northeastern portions of China.

In Beijing, there were few shoppers at the Oriental Foundation International Automobile City today. At the Toyota dealership, a Chinese national flag hung above the front entrance.

Sales have slowed “quite a bit” since the tensions flared up, said Wu Bo, 33, a car salesman who worked at the auto city. There were no protests at the distributors over the weekend, he said.

At the strip of Japanese-brand dealerships along Longwu Road in Shanghai, there were no protesters and the only visible sign of the China-Japan row were red banners in Chinese saying “Protect our land, give us back the Diaoyus.”

Car Sales

Sales of Japanese-branded passenger cars fell last month in China, compared with gains of more than 10 percent for German, American and South Korean vehicles, according to China Association of Automobile Manufacturers. Nissan, the biggest Japanese automaker by sales in China, said on Sept. 6 that deliveries in the country have been affected as it cut back on marketing events in the wake of anti-Japan demonstrations that first started last month.

Last May, Honda’s sales in China fell 32 percent in the aftermath of the earthquake and tsunami that struck northeastern Japan two months earlier. Toyota’s deliveries in China plunged 35 percent in May 2011 as a shortage of parts caused by the record earthquake halted production in the country.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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