Japan's three biggest automakers are increasing use of China-made components to cut costs as rising competition erodes profit margins in the fastest-growing major vehicle market. Local content in China averages around 60 percent compared with as much as 90 percent in the U.S.
Price-cutting by Chinese automakers such as Chery Automobile Co. is undermining the ability of Toyota, Nissan and Honda to profit from a market that's forecast to overtake Japan as the world's second-biggest by sales this year. Chery sells cars for as little as $4,000, forcing overseas carmakers to make engines and transmissions locally to remain competitive.
It's difficult for Japanese automakers to make money in China now and Chinese customers don't have much brand-loyalty so all companies have to participate in price cutting to protect their position. Vehicle prices fell 2.2 percent in the first nine months this year from a year earlier, the China Association of Automobile Manufacturers said earlier this month. A 10 percent drop in the price of a 3 million yen vehicle will wipe out any profit for Japanese automakers. They will lose money selling cars for 1 million yen ($8,500) or less in China.
Japanese automakers have set up engine and transmission factories in China to avoid paying import tariffs and transportation costs. Toyota and Nissan's local procurement rate in China is currently at 60 percent, while Honda's CR-V sport- utility vehicle has 65 percent, according to the companies.
China applies a 25 percent import duty on parts, compared with a 10 percent duty on complete cars. The European Union, the U.S. and Canada say that violates pledges China made when it joined the WTO in 2001.
"Toyota and other Japanese automakers need to make their Chinese operations more profitable by pushing local production," said Ichiro Takamatsu, who manages $50 million as chief investment officer at Alphex Investments Co. in Tokyo. "China is a market that no one can ignore."
Toyota began production of its redesigned Camry sedans with Guangzhou Automobile Group Co. in May. Prices of Camry sedans have come down by 30 to 40 percent to about 200,000 yuan ($25,400) after Toyota started producing the model in China, instead of relying on imports from Japan.
"Japanese automakers have to boost their local procurement rates to match their U.S. levels to really make money in China,'' said Endo. He estimates Honda is currently profitable in China while Toyota, Nissan and Suzuki Motor Corp. probably break even. The other Japanese automakers probably don't make money in China, he said.
Overall vehicle sales in China may rise to 7.3 million units this year, Chotai said. China's vehicle sales rose to 5.77 million vehicles in the first 10 months of this year, compared with 4.88 million vehicles in Japan.
Source:佚名