Japan auto makers to slow output in China amid darkened outlook

Wed Sep 26, 2012 4:52am EDT
 
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By Norihiko Shirouzu

BEIJING (Reuters) - Japanese automakers including Toyota Motor Corp (7203.T: Quote) and Nissan Motor Co. (7201.T: Quote) are cutting back production in China in the wake of anti-Japan protests that shuttered dealerships and darkened their sales outlook in the world's biggest car market.

Production slowdowns are a normal feature of the auto industry in mature markets like the United States and Japan, where they are used to keep inventories from ballooning and avoid pressure for automakers to offer deep discounts that erode profitability.

But the steps by the Japanese automakers to cut output in China are an anomaly in a market that has driven the industry's global growth over the past decade and where most automakers had been adding capacity until China's economic slowdown in recent months. That caused production to outpace sales, resulting in larger-than-normal inventory levels at many car dealers.

"For the time being I think you're going to see Japanese automakers' sales in China down by 20 to 30 percent," said Koji Endo, auto analyst at Advanced Research Japan.

"The last time we had protests like this in 2010, the effects only lasted about a month, but I think this time is going to be different. This is going to have a serious impact."

There were also signs the tensions were having an effect on other sectors, most notably airlines, with All Nippon Airways Co Ltd (ANA) (9202.T: Quote) announcing on Wednesday that 40,000 seat-reservations were cancelled for flights between Japan and China from September to November.

EXTENDED HOLIDAY SHUTDOWNS

Nissan, Japan's top automaker in China, said it would halt production at a joint venture in China starting on Thursday, three days earlier than planned, and extending through next week's national holiday period.   Continued...

 
Employees inspect newly-produced cars at a Toyota factory in Tianjin, March 23, 2012. REUTERS/Stringer