China in “downward spiral” according to Japanese industry group image

China, the world’s largest auto market, is today showing the first signs of a “downward spiral” that could severely affect in the near future all Japanese automakers, said the chief of the country’s auto association.

Swinging upwards from a slew of anti-Japanese protests in 2012, the automakers in the country have staged a complete comeback and posted a record first six months tally in china, even as other peers such as Volkswagen or Hyundai had to contend with negative performances. The Japanese growth is a bright spot in the world’s largest auto market, which is now turning away from the past years of double-digit growth and gears up for the slowest auto sales increase in four years. The main reasons are the slowing economic growth, the poorest in more than two decades, followed by the recent stock market turmoil and the desire to impose registration caps in certain cities to alleviate traffic and pollution. The recent slowdown, with a negative figure posted last month for the first time in years, has prompted numerous automakers to lower their prices, undercutting their profits in the key market.

“There’s excessive competition and carmakers are building excessive capacity, and to raise utilization of the plants, they will engage in excessive selling,” comments Fumihiko Ike, chairman of Japan Automobile Manufacturers Association. “Japanese car sales are solid now,” he added, from his experience as chairman of Honda Motor. “But sooner or later, as the overall demand cools, they will be also affected by excessive competition. We can’t be optimistic.” According to researcher LMC Automotive, Japan’s auto brands have grown to a market share of 20 percent in May, returning to the levels seen before 2012, when the political tensions triggered a massive slump.

Via Bloomberg