Japan automakers get fast and furious in China


While Japanese carmakers have fallen behind in the race to win over Chinese consumers, they are shifting into high gear to regain lost market share.

"Both Honda and Toyota have started addressing issues, such as reluctance in bringing in technology and allocating resources to China, that contributed to weak China sales in the past five years," Barclays analysts led by Yang Song, wrote in a report on Tuesday.

Jim R. Bounds | Bloomberg | Getty Images

"The strategy shift has resulted in positive changes already," Song said, adding that a "turnaround" is underway.

From 2008 to 2013, Japanese auto manufacturers collectively lost 12 percentage points in market share in both the sedan and sport utility vehicle (SUVs) segments in China.

Toyota and Honda's sales grew at a compound annual growth rate (CAGR) of 9 percent and 10 percent, respectively, over this period, around half the rate of the overall passenger vehicle market.

A combination of factors has weighed on their performance in the world's largest auto market.

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A bitter territorial dispute between China and Japan over a group of disputed islands in the East China Sea in 2012, which triggered a boycott of Japanese brands, has been a damper on sales.

In addition to this, Japanese automakers have held back on production of their best products and introduced new technologies in China in fear of being copied.

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Toyota, for example, has been relying on one single model, the Corolla, in the key compact sedan market in China, according to Barclays.

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Nevertheless, a shift in strategy is underway, say industry analysts.

Toyota, Honda and Nissan, for example, are strengthening their premium brand lineups in China as well as planning local production in the country.

"The Japanese brands rethought and changed their strategy for winning over Chinese car buyers [and] are now bringing the best they have to show they are at the top of the game," said Namrita Chow, senior automotive analyst at IHS.

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Another positive development is Japanese automakers are making localization a top priority, noted Song.

"After having limited new models for the past five years, both [Toyota and Honda] introduced new and exciting models such as the GAC-Honda Crider, DF-Honda Jade and Toyota Yaris-L in 2013," Song said. "These models are not straight transplants from the overseas markets but rather are specifically designed for the tastes and habits of Chinese consumers."

Judging by the positive initial reaction to these models by Chinese consumers, this shift in strategy is paying off, she said.