How Toyota Tripped in China

Car Giant Hurting From Recall Crisis and Outbreak of Anti-Japanese Nationalism in China

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TOKYO ('s bad enough that Toyota's sales slid 4% in the United States last month, as the overall market jumped 13%. But more damning still is the Japanese carmaker's 6% drop in sales in China. If the world's biggest automaker can't ride the ever-building wave of sales growth in the world's biggest auto market, the company must be suffering some serious engine knock.

Indeed, Toyota's sales slumped 6% to 61,600 units in China in October, for their first year-on-year decline since April 2009. The retreat underlined Toyota's tough slog in China.

Hans Greimel
Hans Greimel

Toyota is playing catch-up to China's market leaders: General Motors, Volkswagen and Hyundai. But this year's recall troubles, combined with political tensions between Beijing and Tokyo, may be tripping up a company that, to many Chinese, has come to symbolize Japan Inc.

China's total market sales in October aren't out yet. Overall industry demand may have actually contracted. But that seems unlikely. The country's insatiable appetite for wheels drove passenger car sales 41% higher to 8.5 million units through September.

Including October's results, Toyota's sales in China were still up 17% for the year. But why they lagged the market and then slid into reverse is the worrying question.

Toyota didn't offer any explanations. But some possible theories seem clear.

First, Toyota is still hurting from this year's recall crisis. In China, Toyota can't lean on a long history of customer loyalty because many customers are first-time buyers. If a brand gets a black eye in China, customers are more apt to pass it by and look at the competition.

Second, the recent outbreak of anti-Japanese nationalism in China is likely hitting a company many see as the archetypical Japanese corporate entity. The diplomatic tensions, over disputed islets in the East China Sea, are spurring calls to boycott Japanese goods in China.

No matter the reasons, October's stumble hasn't discourage Toyota. Its 2010 China sales target of 800,000 vehicles remains intact - representing a 5.3% increase over last year.

Hans Greimel is Asia editor of Automotive News, a publication of Crain Communications, which first published this article.

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