Chinese passenger-vehicle sales unexpectedly shrank for the first time in eight months as a territorial dispute with Japan turned consumers away from Japanese brands.
Wholesale deliveries of sedans, SUVs and multipurpose vehicles fell 0.3% to 1.32 million units last month, the China Association of Automobile Manufacturers said. The results undermined CAAM's forecast for rising sales in the second half of 2012, as the slowest economic expansion in three years cools demand for new vehicles.
Toyota and Nissan reported their biggest drops in China sales since at least 2008, while Honda Motor Co.'s sales were the lowest since May 2011, according to monthly data compiled by Bloomberg.
"We also expect October sales to be weak, probably down for the Japanese autos," said Steve Man, an analyst with Nomura Holdings in Hong Kong. "I believe the three automakers, GM, Hyundai and Volkswagen combined, will take market share from Japanese carmakers."
In the first nine months, passenger-vehicle deliveries rose 6.9% to 11.3 million units, the association said. Carmakers' inventory climbed to 776,000 units by the end of September, the highest level this year, said Chen Shihua, CAAM's head of statistics. Total sales of vehicles, including trucks and buses, fell 1.8% to 1.6 million units last month.
Sales of Japanese cars slumped 41% to 160,000 units, cutting their combined market share to 12.2 % from 20.5% a year earlier, according to the association. Chinese car brands posted the second-highest monthly sales this year, delivering 561,900 vehicles for a 7.5% gain.
Japanese carmakers may lose their lead among foreign brands in China for the first time since 2005 after rioters torched dealerships and smashed cars in protests over disputed islands. The China slump is the third crisis for the automakers in less than two years, after the Japanese tsunami and Thai floods that destroyed factories and disrupted supply lines.
"The decline in sales will have a direct impact on the earnings of Japanese carmakers," said Yoshihiko Tabei, a senior analyst at Kazaka Securities Co. "For China, it will mean that Japanese carmakers will see a widening of their losses. Until the political situation settles, it's difficult to forecast how sales will turn out in the country."
Last week, Mazda Motor Corp. reported that deliveries in the country tumbled 35% to the lowest in 19 months and Mitsubishi Motors Corp. said that Chinese sales plunged 63%. Suzuki Motor Corp. said yesterday they fell 43%.
The China crisis may inflict more economic damage on Japan's automakers than last year's tsunami, according to the China Passenger Car Association. Their share will fall to 22 % this year from 23% in 2011, the group said.
Toyota and Honda reported damage to dealerships from fire last month, while TV footage showed overturned Japanese cars and window shields smashed by demonstrators in some cities.
Nissan will weigh the impact of the Chinese protests before deciding whether to revise its sales target there, Executive VP Takao Katagiri said Oct. 5. Japan's three largest automakers plan to cut production to half of normal levels in China, the Nikkei newspaper reported Oct. 8.
It's "looking very difficult" for Toyota to meet its target of selling 1 million vehicles in China this year, said Dion Corbett, a Tokyo-based Toyota spokesman.
Most non-Japanese brands appear to be benefiting. Audi boosted sales 20% last month to 35,512 vehicles. Last month, Audi asked a Chinese dealer to remove a banner advocating the murder of Japanese people after a photograph of the sign went viral on the Internet.
South Korea's Hyundai Motor Co. and affiliate Kia Motors Corp. said Oct. 7 they will probably sell more vehicles in 2012 than the 1.25 million they had projected and that combined deliveries rose 9.5%. Ford Motor Co. said its China sales climbed 35% to 59,570 units last month.
General Motors, the largest foreign automaker in China, may be missing out. The company earlier this week reported its slowest China sales growth in eight months and said deliveries of Buicks and Cadillacs declined.