Japanese automakers struggle in China amid rapid shift to electric vehicles

Image courtesy of Channel News Asia

The sales crisis for Japan’s automakers in China continues, as industry data reveals a rapid shift towards electric vehicles (EVs), resulting in a steep decline in gasoline-powered vehicle purchases. In the first quarter, total sales of Japanese auto brands in China dropped by 32% year-on-year, more than twice the rate of overall market contraction.

While automakers such as Volkswagen AG have also been impacted by this change in China, it is Japanese automakers that stand out due to their limited contribution to the fast-growing electric and plug-in hybrid sales sector. As a result, production and profit margins in China are under pressure as automakers reduce output and prices for gasoline-powered vehicles to maintain inventory levels.

Mitsubishi Motors Corp recently revealed a suspension in the production of its Outlander SUV in China for three months and will incur a charge of US$77 million due to slow sales at its joint venture with state-owned GAC Group. Mitsubishi’s first-quarter sales in China fell by 58% from the previous year.

In another noteworthy event, Nissan’s Sylphy sedan, which had been China’s top-selling vehicle for three years, was surpassed last year by the BYD Song, a plug-in hybrid produced by China’s top automaker, BYD. Nissan has responded by adding an electric-drive hybrid version of the Sylphy that will be eligible for incentives in Guangzhou, with plans to collaborate with other cities on further support.

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Toyota Motor Corp, however, may be losing sales in China due to its cautious approach to all-electric vehicles. Automotive consultancy Automobility’s founder and CEO, Bill Russo, commented that “Japan is the biggest loser of the price war so far,” and warned that the writing is on the wall as EVs become more affordable and attractive to potential buyers.

Data from the China Association of Automobile Manufacturers analysed by Reuters showed that Japan’s share of car sales in China fell to 18.5% in the first quarter from 24% in 2020. Toyota and its luxury brand Lexus suffered a 14.5% decline in first-quarter sales.

Nissan Motor Co Ltd, Mazda Motor Corp, and Honda Motor Co Ltd also experienced substantial drops in sales in China during the first quarter, with declines of 45.8%, 66.5%, and 38.2% respectively. Masatoshi Nishimoto, principal research analyst at S&P Global Mobility in Tokyo, warned that Japanese automakers could face similar struggles in the United States as they have in China, reports Channel News Asia.

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Alex Morgan

Alex is a 42-year-old former corporate executive and business consultant with a degree in business administration. Boasting over 15 years of experience working in various industries, including technology, finance, and marketing, Alex has acquired in-depth knowledge about business strategies, management principles, and market trends. In recent years, Alex has transitioned into writing business articles and providing expert commentary on business-related issues. Fluent in English and proficient in data analysis, Alex strives to deliver well-researched and insightful content to readers, combining practical experience with a keen analytical eye to offer valuable perspectives on the ever-evolving business landscape.

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