Hit your foreign enemies where it hurts by smashing up cars owned by your fellow countrymen. That was the clever reaction of some Chinese protesters last week to the long-running territorial tussle in the East China Sea between China and Japan. Yesterday, Toyota Motorresumed operations at Chinese factories closed during the protests. China-bound output, however, will be lowered “taking into account the present situation”, the company said. But is Toyota genuinely suffering as a result of anti-Japanese sentiment, or do the production cutbacks point to a bigger problem?
China’s car market is fiercely competitive and highly fragmented. Gone are the days of breakneck sales growth. That has left Japan’s carmakers struggling to keep up. Sales of Japanese cars in China have grown an average 15 per cent over the past five years, half the rate at which their European peers have grown there. Part of the problem for Toyota is its lack of commitment to China. It is the world’s biggest carmaker, and China is the world’s largest car market. Yet only a 10th of Toyota’s global car sales are in the country. For Nissanand Volkswagenthe proportion is more than one quarter. Furthermore, when Toyota recalled faulty cars in the past, it was criticised in China for prioritising the US market.
It is true that China’s leaders have cultivated nationalism. But it is a false leap to say that this drives the purchasing decisions of Chinese consumers. Sales of Korean and European cars are outpacing those of Chinese-brand cars. Japan is excelling in many sectors in China. Convenience stores are a case in point. Japan’s FamilyMart, 7-Elevenand Lawsonhave aggressively expanded in Chinese cities. As a result, the market share of domestic peers such as Bright Foods has fallen 10 percentage points during the past five years, according to Euromonitor data. Meanwhile, Fast Retailing’s Uniqlo is now one of China’s most popular clothing brands. Being Japanese is not Toyota’s problem. The cutbacks look more like strategic sense.