In China, Japanese Cars Are Losing Their Cachet
Young Chinese Consumers Say Japanese Brands Aren't Cool Anymore
Aug. 8, 2014 7:04 a.m. ET Wall Street Journal
SHANGHAI—In April, 30-year-old financial manager Deng Dan replaced her three-year Nissan Qashqai crossover and upgraded to an Audi NSU.XE +0.76% sedan.
"Audi is very popular among young people. I just wanted to go with the fashion," said Ms. Deng, who lives on the outskirts of the southern Chinese city of Changsha. "In my mind buyers of Japanese cars are those who are less affluent."
Ms. Deng's thoughts highlight the challenge confronting Japanese auto makers in the world's largest auto market: weakening popularity among younger and more affluent consumers.
The Japanese brands had been rebounding after a flare-up in tensions between Beijing and Tokyo in 2012 sent sales plummeting. Japanese auto makers clawed back market share, mainly at the expense of domestic Chinese brands, after a series of measures--including accelerating new model launches and featuring Chinese tastes in designs—to win back consumers.
But recent data suggest that growth is going to lose traction as cars like the Honda Accord are no longer seen as cool.
The China Association of Automobile Manufacturers said Friday that Japanese auto brands' share of China's passenger-vehicle market rose to 15.3% in the first seven months of this year from 15.1% in the year-earlier period. By contrast, German brands' share rose to 21.5% from 19.6%. American brand captured 12.8% of the market, up from 12.3%, while Chinese brands lost market share, falling to 37% from 40%.
Overall, China's passenger vehicle sales rose 11% to 11 million units in the January-July period, the government-backed auto association said.
"Last year Japanese car makers did a better-than-expected job. But this year I feel their growth is anemic," said Sa Boni, an analyst at IHS IHS +0.31% Automotive. In addition to increased competition, Japanese brands are being hurt by a perception among Chinese consumers that they aren't dynamic and fun, he said.
The slowing growth means that two of Japan's three largest car makers will face challenges to meet their annual sales goals. Toyota Motor Corp. 7203.TO -0.53% and Honda Motor Co. 7267.TO -0.13% had said they each aimed to grow China sales by about 20% this year. So far this year, however, Toyota has posted a 9.8% gain, while Honda has reported a 6.9% rise.
Neither auto maker has plans to reduce their sales targets, the companies said. Toyota attributed slower sales gains to increased competition and model changes, while Honda said it would launch more new models and gear up promotion efforts.
Nissan Motor Co.'s China car sales are up 15% so far this year and it is targeting an 18% full-year increase.
Analysts say sales of Japanese brands in the lucrative full-size sedan segment are notably weak, due to fiercer competition and a shift by consumers to entry-level premium cars. Cars in the segment carry an engine size 2.0 to 2.4 liters and are usually priced in China between 180,000 yuan and 300,000 yuan ($29,000 to $49,000).
A recent poll of 50,000 Chinese consumers by U.S. brokerage Stanford C. Bernstein and car website Autohome found that 48% of potential consumers of Japanese auto brands said they would consider buying a German entry-level premium car if they purchase a full-size sedan.
The challenge Japanese auto makers face in China can be illustrated by Honda's Accord, analysts say. The car was one of the best-selling sedans in the country for about a decade after Honda began building the model in China in 1999.
However, lately sales of the model have been slowing, a dip that analyst blame on a lack of inspiring features.
"The Accord was so successful that Honda wouldn't dare to alter it too much," said Yale Zhang, managing director at consulting firm Automotive Foresight. "But compared with Volkswagen's VOW3.XE +1.83% Passat or General Motors GM +0.49% ' Buick Lacrosse, it looks too old."
Accord sales fell nearly 30% in the first seven months of this year, Honda data show. A Honda spokeswoman cited high pricing as a factor but declined to comment further. The Accord starts at around 180,000 yuan in China.
Japanese brands are also losing traction in China's promising sport-utility-vehicle market. According to Automotive Foresight, Japanese brands' share of this segment has fallen to 21% from 46% in 2009, while German brands have increased their shares to 18% from zero over the past five years.
To shore up sales, Japanese car makers said they would focus on luring Chinese consumers who were born in the 1980s and 1990s.
"We are highlighting 'youth' in both designs and marketing campaigns," said Niu Yu, a Toyota spokesman. Earlier this year, Toyota launched a global advertising campaign featuring U.S. singer Beyoncé to attract younger consumers in emerging markets, including China, said Mr. Niu.
Natsuno Asanuma, a Honda spokeswoman, said it is focused on building a "dynamic and young image." At the Beijing auto show in April, Honda revealed its Concept B, a small-sized concept car the company says is aimed at younger generations and looks "cool."
Nissan said it is developing two models that will cater to the taste of China's younger buyers. "The cars, which are being designed by Chinese designers, will fully address the taste of China's young consumers born in the 1980s, who will soon become the world's largest consumer group," Nissan said in a written statement. The company said it showcased the cars' concept models at recent auto shows in China and received a positive response.
