Toyota Internal Document Shows China Cutbacks Lasting to July

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Toyota Motor Corp. researchers estimate Japanese automakers are unlikely to fully restore Chinese production before July because of consumer backlash stemming from a territorial dispute between the two countries, according to a document obtained by Bloomberg News.

Japanese automakers’ output in China may be 40 percent less than normal this quarter and gradually improve until it’s fully recovered in the third quarter of next year, according to an Oct. 23 internal note prepared by Toyota’s research division. Toyota spokesman Joichi Tachikawa declined to comment on the document.

The estimates indicate Asia’s largest carmaker is bracing for a longer slump in Chinese demand than other Japanese automakers. Honda Motor Co. said last week that sales may not return to normal until the Lunar New Year in February and lowered its sales forecast in China, the world’s biggest automobile market, by 17 percent.

“Production for Japanese carmakers won’t be back to normal any sooner than April next year,” said Mitsushige Akino, who oversees the equivalent of about $600 million in assets at Ichiyoshi Investment Management Co. in Tokyo.

Two Scenarios

The Toyota research document, which examines the economic impact of the current political tensions between Japan and China, has two scenarios. The optimistic version estimates production will be 40 percent less than normal in the current quarter, 20 percent in the first quarter of next year and 10 percent in the second.

In the pessimistic scenario, production will be 50 percent less than normal in the October-to-December period, 40 percent in the first quarter of next year, 25 percent in the second and 20 percent in the third.

The research doesn’t provide estimates beyond the third quarter of 2013 and doesn’t provide Toyota’s own production plans in China. The company reports earnings today.

For Japanese automakers, the boycotts against their products follow last year’s tsunami and Thai floods that destroyed factories and disrupted supply lines.

The decades-long territorial dispute, involving a group of islands called Senkaku in Japan and Diaoyu in China, was reignited in April, when then-Tokyo Governor Shintaro Ishihara, a longtime critic of China, proposed buying the territories. That led Prime Minister Yoshihiko Noda’s administration to purchase the islets in September, escalating tensions between the two nations and sparking violent protests across China.

Honda cut its annual profit forecast by 20 percent last week, citing China. Fuji Heavy Industries Ltd., the maker of Subaru-brand cars, has said it may take about half a year for production to normalize. Mazda Motor Corp. has said it expects sales to be cut by about 20 percent through March next year.

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