http://www.businessweek.com/articles/2013-11-07/chinese-back-to-buying-japanese-cars-as-territorial-tensions-ease

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Chinese Back to Buying Japanese Cars as Territorial Tensions Ease


Burned cars at a Toyota dealership after they were set on fire by anti-Japan protesters in Qingdao, China, in November 2012

Photograph by The Asahi Shimbun via Getty Images

Burned cars at a Toyota dealership after they were set on fire by anti-Japan protesters in Qingdao, China, in November 2012

A year ago, Honda Motor (HMC) salesman Liu Hao had one of China’s most hopeless jobs: persuading local consumers to purchase Japanese cars. After a territorial dispute over uninhabited islands in the East China Sea flared up in late summer of 2012, Chinese protesters took to the streets to denounce their Asian neighbor, overturning Japanese autos and attacking Japanese factories and restaurants. The unrest had a chilling effect on Japanese auto sales in China. Amid angry talk of boycotts, Honda sales fell more than 50 percent in October of last year and continued to drop well into 2013.

Today the two nations are still arguing about the islands, controlled by Japan and claimed by China, but tensions have eased, and customers are in the mood to buy Japanese products again. On a recent November afternoon, about 20 people crowded into a Honda showroom in central Beijing, checking out the new Jade sedan, launched in September for the Chinese market. Local buyers “trust the good reputation and engine of Honda,” says salesman Liu, 31. Besides, he says, fighting between China and Japan “would destroy the world, so there won’t actually be a war.”

Honda’s sales in China jumped 212 percent in October from the same period the year before, following a 118 percent increase in September. One potential customer is Mr. Song, a 28-year-old banker who won’t give his full name. He’s buying a Honda Civic and isn’t worried that a revival of anti-Japanese sentiment might endanger his vehicle. Given public revulsion at official corruption reported by the state media, he says, drivers of cars with government license tags “should be more worried about citizen anger and the danger of having cars smashed” than Honda drivers in Beijing.

The thaw has extended to other Japanese carmakers: Nissan Motor (NSANY) had a 78 percent vehicle sales bump last month after a 54 percent rise in September, and Toyota Motor (TM)’s sales grew 81 percent in October and 64 percent the month before. Smaller Japanese automakers are looking to expand. “I understand the political issue isn’t zero, but we see that buyers are coming back to our dealerships,” says Yasuyuki Yoshinaga, president of Fuji Heavy Industries (7270:JP), which makes Subaru cars. China is a small market for Subarus, with Fuji Heavy selling only 50,000 vehicles there a year, but the automaker last month launched a partnership with Chinese distributor Pangda Automobile Trade. Yoshinaga wants to double China sales.

The automakers’ rebound is encouraging, since last year’s protests left them particularly vulnerable, says Shaun Rein, managing director of China Market Research Group in Shanghai. Videos circulating online of crowds attacking Chinese drivers of Japanese cars scared away Chinese car shoppers who might have otherwise bought Japanese. Other companies such as clothing retailer Uniqlo (9983:JP) and cosmetics maker Shiseido (4911:JP) are less conspicuously Japanese. “After the protests, people were more scared about getting attacked by other Chinese,” Rein says. Now, “people are less scared.”

The island dispute is hardly over. A Chinese ship entered Japan’s exclusive economic zone near the islands, the Japanese coast guard said on Nov. 2. Two days later, following reports that Japan may shoot down Chinese drones near the islands, a retired Chinese military commander took to the pages of China’s Global Times, a government-controlled tabloid known for its bellicose nationalism, to warn that such an attack would be considered an act of war. No one ever said selling in China would be easy.

The bottom line: A year after Chinese protesters trashed Japanese cars, the Chinese are buying Toyotas, Hondas, and NIssans again.

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Einhorn is Asia regional editor in Bloomberg Businessweek’s Hong Kong bureau. Follow him on Twitter @BruceEinhorn.
Larson is a Bloomberg Businessweek contributor.
Mukai is a reporter for Bloomberg News in Tokyo.

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