Japanese dealerships in China retrench in wake of disputes

Three months after a territorial dispute led rioters to vandalize Japanese cars in China, automakers from Toyota Motor Corp. to Nissan Motor Co. are luring back buyers with discounts and guarantees. Dealers like William Chen may take more persuasion to invest in the brands.

“Sales of Japanese brands plunged about a third at my outlets,” said Chen, whose family owns about 30 showrooms selling Nissan and nine other brands in the eastern city of Taizhou. “I would prefer safer brands over Japanese ones in the future.”

More distributors than ever are considering quitting Japanese car brands, even as showroom traffic and orders begin to rebound, according to the China Automobile Dealers Association. Failing to sign up enough new dealers will hurt Japanese automakers, benefiting General Motors Co., Volkswagen AG and Hyundai Motor Co. as they compete to expand in smaller Chinese cities where the bulk of future demand lies.

“It’s definitely going to affect the Japanese automakers’ expansion,” said Ivo Naumann, Shanghai-based managing director at AlixPartners, which advises companies on strategy. “If dealers had to choose between, say Toyota and Volkswagen, why would they choose a Japanese brand if they have to deal with this every two or three years?”

About 1,800 Toyota, Nissan and Honda-branded cars were damaged during anti-Japanese protests in September, according to Guangzhou Automobile Group Co., which operates joint ventures with both Toyota and Honda Motor Co.

German, American and South Korean brands gained market share in October at the expense of Japanese marques, the China Association of Automobile Manufacturers said in a Nov. 9 statement.

Nationwide demonstrations erupted in China in September after Japan’s government nationalized a group of uninhabited islands that China also claims.

A Toyota and a Honda dealership were burnt down in the eastern port city of Qingdao in September during the protests. The owner, Wang Chongwei, suffered losses of as much as 80 million yuan ($12.8 million), Netease.com reported in October. Wang didn’t answer calls and text messages to his mobile phone. An employee who answered the phone at the Toyota dealership said they are focusing on fixing cars for customers. 

(Bloomberg)