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The Sino-Japanese dispute over the Diaoyu / Senkaku islands has hurt Japanese automakers.In recent weeks, Chinese demonstrators have torched Japanese businesses including auto plants and cars. The tensions prompted Japanese auto makers to cut production by 50 per cent in China, the world’s largest auto market.
But the benefit to American automakers like General Motors that has a significant share of the market, or Ford with a smaller share, isn’t very clear.
Citi analyst Itay Michaeli explained to Business Insider that the Chinese auto market is very fragmented and that the presence of over a hundred auto makers makes it difficult to say just who would benefit from the dispute.
Matt Collins at Edward Jones also argued that there are too many competitors in the Chinese auto market. “Despite being one of the largest players in the Chinese auto market, General Motors only grew sales 1.7% in September,” according to Collins. “That modest growth highlights how competitive the Chinese auto market is, with major global brands and over 70 domestic producers all competing fiercely for the world’s largest vehicle market.”
And this argument is strengthened by reports that Korean automakers like Hyundai and Kia Motors that projected 1.25 million in 2012 sales, now think they will beat their target because of the dispute.
Moreover, Michaeli doesn’t think the impact of the anti-Japanese sentiment is anywhere near as significant as the impact that last year’s Japanese earthquake and tsunami had on the nation’s auto production. “There doesn’t seem to be a similar shift, and it’s too early to tell what’s going to come politically.” The impact from the dispute “does not seem on that type of scale,” he said.
Some point to the 1.8 per cent year-over-year decline in total vehicle sales in September and attribute it to the decline in Japanese auto sales, but Michaeli points out that this could also be because consumers “deferred” their purchases. “There does seem to be loyalty in car purchases. …People have deferred purchase as opposed to buying something else.”
For now it seems like U.S. auto makers are unlikely to see significant benefits from the blow to their Japanese competitors, and that sentiment would need to get a lot worse before a share shift takes place.