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Japan automakers in China cuts
Last Updated(Beijing Time):2012-09-27 00:00

Japanese automakers, including Toyota and Nissan, are cutting back production in China following anti-Japan protests that shut dealerships and darkened their sales outlook in the world's biggest car market.

Production slowdowns are a normal feature of the auto industry in mature markets such as the United States and Japan, where they are used to keep inventories from ballooning and avoid pressure for manufacturers to offer deep discounts that erode profitability.

But the steps by the Japanese automakers to cut output in China are an anomaly in a market that has driven the industry's global growth for a decade and where most automakers had been adding capacity until China's economic slowdown in recent months.

That caused production to outpace sales, resulting in larger-than-normal inventory levels at many dealers.

"For the time being, I think you're going to see Japanese automakers' sales in China down by 20 to 30 percent," said Koji Endo, auto analyst at Advanced Research Japan.

"The last time we had protests like this, in 2010, the effects only lasted about a month, but I think this time is going to be different. This is going to have a serious impact."

There were also signs the tensions were having an effect on other sectors.

Most notable was air travel, with All Nippon Airways announcing yesterday that 40,000 seat-reservations had been canceled for flights between Japan and China from September to November.

Nissan, Japan's top automaker in China, said it would halt production at a joint venture in China from today, three days earlier than planned, and extending through next week's National Day holiday period.

Toyota plants in Tianjin and Guangzhou suspended production from yesterday through the week-long holiday, Tokyo-based spokeswoman Shino Yamada said, a few days earlier than planned.

Production at factories in China may be further curtailed depending on market conditions, she said.

An insider said that Toyota was also preparing to reduce output at factories in Tianjin and Guangzhou through November.

One plan under discussion would keep the factories on two shifts but shut down production on Mondays and Fridays.

In addition, Toyota has discussed reducing production of luxury Lexus models at its plant in Kyushu, southern Japan, during October because of slower demand in China.

A senior Toyota executive in Beijing said the company would probably fall short of its goal of selling 1 million cars in China this year. In 2011, Toyota and its local Chinese partners sold about 900,000 cars.

"It's very difficult to sell cars right now, but that's true with every Japanese brand. Not just us," said the executive.

Mazda has decided to halt production in China tomorrow and on Saturday, giving workers two extra days off as part of the national holiday shutdown.

Suzuki said it had stopped one of two shifts that it normally runs in China.

Anti-Japan sentiment in China escalated this month after Japan said it decided to "buy" the Diaoyu Islands in the East China Sea from a "private owner."

In protests across China, some demonstrators vandalized properties of Japanese companies, including a Toyota outlet in the eastern city of Qingdao that was set ablaze.

A senior Beijing-based Toyota sales executive said the long-term impact of the dispute on Japanese brands was uncertain. "Unlike before, when sales recovered fairly quickly, things seem very different this time," he said. "But it's still very difficult to gauge what kind of long-term fallout we are going to have."

The executive, involved with sales and marketing of Lexus, said all Lexus outlets in China had reopened and were operating normally.

"But customers are expressing fears about owning Japanese-branded cars," he said, "and that worries me a bit."

The latest production adjustments come on top of general cutbacks Japanese automakers had been making prior to the protests. Global automakers in general have been coping with slower-than-anticipated auto sales in China this year.

Source:Shanghai Daily 
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