Summary of Key Points
The sales of the three major Japanese automakers (Toyota, Honda, and Nissan) in China plummeted significantly in May, with Honda experiencing the steepest decline of nearly 50%. Overall sales have also continued to fall, and their market share has dropped from a high of 17% last year to 10.5% in May this year. Experts believe that this is a structural long-term decline caused by multiple factors, including slow progress with electrification, insufficient localization, and lagging intelligence technologies. While the situation is difficult to reverse in the short term, the automakers have begun to take steps to improve their situation through localized cooperation and accelerating the rollout of new energy vehicles.
I. May Sales Plunge: Continuous Decline Becomes the Norm
The sales of the Japanese automakers in China in May were particularly alarming:
- Honda: With 28,300 units sold, a year-on-year decline of 48.68% (a nearly 50% reduction), and the monthly decline has been worsening (16.55% in January to 48.28% in April).
- Toyota: 102,300 units sold, a decrease of 31.7%, marking the fourth consecutive month of decline.
- Nissan: 37,800 units sold, a decline of 34.86%, for the second consecutive month.
From January to May, all three companies have seen declines: Honda’s drop was the largest at 32.47%, followed by Nissan at 11.39%, while Toyota’s decline was 14.8% but it still maintains its leading position among Japanese automakers. The overall decline is not an isolated incident; it represents a sustained trend over several months.
II. Market Share Shrinks by Over 30%, Moving from “Mainstream” to “Periphery”
The market share of Japanese cars in China has declined rapidly:
- The peak last year was 17% (meaning 17 out of every 100 cars sold were Japanese); in May, this figure dropped to 10.5%, a decrease of 6.5 percentage points in just over half a year.
- In the first quarter of this year, the market share was 13.9%; it further fell to 11.1% in April, and continued to decline each month.
The cumulative sales for the first five months were 892,500 units, a year-on-year decrease of 17.6%, indicating that consumers are increasingly avoiding Japanese cars.
III. The Core Reason for Poor Sales: “Failing to Keep Up with China’s Pace”
Experts have identified several key issues, all stemming from the Japanese automakers’ slow response to market changes:
1. Wrong Approach to Electrification: Chinese consumers prefer hybrid and electric vehicles that can be charged, while Japanese automakers have focused on fuel-efficient hybrid (HEV) models. The domestic market for these vehicles is being dominated by Chinese-made hybrids and electrics, which offer better cost-effectiveness due to lower charging costs compared to refueling.
2. Insufficient Localization: Japanese headquarters exercise too much control, resulting in long delays in making changes to vehicle configurations and pricing. For example, the car’s infotainment systems are not as user-friendly as those of domestic brands, and advanced features like autonomous driving are lacking, which appeals less to younger consumers.
3. Price Competition Damaging Reputation: To compete in the market, Japanese automakers have significantly reduced prices, leading to lower resale values and impacting their brand image.
IV. Future Trends: Difficulty in Reversing the Trend in the Short Term, Mixed Outcomes in the Medium to Long Term
Experts predict the following:
- Short-term (6–12 months): The decline will slow, but market share is unlikely to return to the 13.9% level of the first quarter; it is expected to remain between 9% and 11%.
- Medium to Long-term (2–3 years): A clear divergence among the three companies is likely to occur:
- Toyota: Will show the strongest resilience due to its commitment to reform and investment in new energy production.
- Nissan: Limited research and development efforts will limit its growth potential.
- Honda: With a slower transformation process and an outdated product lineup, its market share may fall below 8%.
- Long-term: Domestic Chinese brands have established a strong position in electrification and intelligence technologies, leaving Japanese automakers with little chance of reclaiming their former dominance.
V. Automakers Taking Action to Improve Their Situation
Japanese automakers are beginning to address these issues:
- Toyota: Collaborating with local technology companies like Momenta to develop advanced driving systems and launching L4-level autonomous taxis in Guangzhou and Shenzhen.
- Nissan: Plans to launch five new energy vehicles within the next year and export Chinese-made models globally, aiming to sell 1 million units in China by 2030.
- Honda: Using local components and platforms to accelerate the development of new energy vehicles and enhance localization efforts.
Whether these measures will be successful remains to be seen, as the Chinese market is changing rapidly, and consumer preferences are shifting.
In summary, the poor performance of Japanese cars in May is not an isolated incident but a result of their delayed transformation. To survive in the Chinese market, they must adapt to local demands and abandon their traditional approaches. Otherwise, their market share is likely to continue to decline.