The yen falls, so carmakers in Japan rally. The pattern is as established as the sun rising in the east. A one-month low in the yen on Tuesday produced 2 and 3 per cent jumps for Honda, Nissan and Toyota among other exporters. But this week all three have reported soggy sales in China. They need to sell more cars in the world’s biggest market to justify any sustained acceleration.
A year ago, rising tensions over the islands known in China as Diaoyu and in Japan as Senkaku hit Japanese enterprises hard. Sales and showroom traffic halved for Nissan in China, for example. Attitudes to Japanese brands among the Chinese have eased since, but Japan’s big three carmakers are shifting at least 3 per cent fewer units now than in 2012. In the case of Nissan, which sells the most, sales are off 6 per cent. In a market growing at 16 per cent year on year and accounting for a quarter of the world’s car sales, that is a huge stumble.
But this is also a developing market. That gives the Japanese brands a potential advantage: their quality. So far, the average Chinese buyer has been focused on simply owning a car. About three-quarters of the country’s sales over the past five years have been to first-time buyers, according to AlixPartners. For these buyers, the freedom offered by a first car (remember the feeling?) almost certainly trumped considerations such as likely resale value. China has only a nascent used-car market to guide buyers – for every three new cars, 1.2 used ones are sold (US 1:3, Japan 1:2.2). But soon those first-timers will be trading in, at which point, those who bought local (about two-fifths) will find that resale value depends on quality reputation, where Japan beats just about everyone.