Deepening economic problems in China are exacerbating the situation for Japanese automakers, who are already facing challenges due to slowing growth in the US and a strengthening yen.
🔻 Production Cuts
Japan’s largest companies—Toyota, Honda, and Nissan—have been forced to reduce production in China amid rising competition from local electric vehicle manufacturers and a slump in the housing market. In July, more than 16% of their sales came from the Chinese market, the largest in the world. However, now car sales in China are declining due to a sluggish economy and fears about increasing competitive threats from Chinese automakers.
💼 Adapting to Changes
Honda and Nissan have already cut production at their factories in China, and Mitsubishi suspended operations last year. These moves aim to reduce inventories and adapt to changing market conditions, but they may be too late. In the third quarter, shares of Japanese automakers dropped by 17%, the second-worst performance among Topix sectors.
📊 Economic Prospects
While the economic downturn in China remains a serious problem, there is hope that the US will avoid a recession, which could help stabilize the position of Japanese companies. The Federal Reserve is expected to lower interest rates, which would support the world’s largest economy. This is particularly important given that about 39% of the revenue of Japan’s largest automakers comes from North America.
💡 Growth of Chinese Manufacturers
However, the problems facing Japanese companies are not limited to the downturn in China. China’s growing automotive industry, like BYD, is actively capturing new markets. For example, BYD holds 40% of the electric vehicle market in Thailand, while Japanese brands account for less than 1%. Experts expect Chinese automakers to launch a price war abroad, intensifying competition for Japanese companies.
⚙️ The Future of the Automotive Industry
Amid rising competition and shifting global markets, Japanese automakers face the challenge of adapting to new realities to maintain their positions in the global market.