Open Prejudice Shows Depth of Toyota’s Slump in China

Honda Motor Co. employees in the Chinese city of Wuhan need only visit the popular Feng Bo Zhuang restaurant to see the resentment their company faces. A sign at the door says Japanese are barred from entering.

Discrimination against Japanese is common in China, according to Yasuhide Mizuno, the head of Honda’s venture in Wuhan, some 500 miles (800 kilometers) up the Yangtze River from Shanghai. Mizuno -- who has also been assigned to Thailand, Taiwan, Malaysia and Australia -- says he’s never worked in a more hostile place.

“Wherever I go, like department stores or in taxis, people ask me whether I am Japanese,” Mizuno, 49, president of Dongfeng Honda, said in an interview at the Shanghai auto show. When he says yes, he said, the reception can be frosty.

Mizuno’s experiences in the city, site of one of the bloodiest battles of the Sino-Japanese war in the 1930s, illustrate why sales for Honda and Toyota Motor Corp. have yet to recover since violent protests across China seven months ago. Though the riots -- triggered by a territorial dispute over uninhabited islands -- have subsided, Japanese carmakers are continuing to lose share in the world’s biggest auto market.

The future of Japan’s car companies in China “is tied to Sino-Japanese relations, and there isn’t much one company can do through marketing,” said John Zeng, director of Asia Pacific forecasting for LMC Automotive in Shanghai. “If consumers generally don’t have a positive feeling toward them, their market share will only decline further.”

‘Won’t Buy’

Chen Min, a 26-year-old assistant at a technology firm, is shopping for her first car. The dispute over the islands, called Diaoyu in China and Senkaku in Japan, is fresh in her mind.

“I don’t really care about brands,” Chen said as she checked out the gleaming models on display at the Shanghai Auto Show. “But there are cars I won’t buy -- the Japanese ones. The reason is simple: Diaoyu.”

First-quarter China deliveries for Honda, Nissan Motor Co. and Toyota fell even as overall Chinese car sales rose 17 percent. The share of Japanese brands dropped to 15 percent, versus a peak of 23 percent in 2011, according to the China Association of Automobile Manufacturers. LMC predicts the Japanese will see no growth in China this year, while the country’s auto market will expand 10 percent. Toyota doesn’t expect deliveries in the country to reach pre-protest levels before this autumn, China chief Hiroji Onishi said at the Shanghai show.

In the quarter ended in March, Ford Motor Co.’s sales in China overtook those of Toyota, the world’s largest carmaker. Last year, Honda’s CR-V, the top-selling foreign-branded sports utility vehicle in China since 2008, ceded that title to Volkswagen’s Tiguan, according to researcher IHS Automotive.

Tee Times

For Honda’s Mizuno, the numbers are personal, though he says things are slowly improving. Japanese expatriates are still turned away from grocery stores, but not as often as before, he said. The Wuhan Tianwaitian Golf Country Club is always booked when he tries to reserve a tee time, he says, though it’s better than simply being told Japanese aren’t welcome on the course, as was the case a few months ago.

“I’ve never had that kind of experience in Beijing, Shanghai or Guangzhou,” Mizuno said. “They don’t understand that what they do affects foreign impressions of the city.”

Wang Qian, a representative at Tianwaitian’s reservations hotline, said the club doesn’t discriminate, though she acknowledged it refused Japanese golfers in September and October. Currently, the club prioritizes bookings for members and Japanese executives don’t belong to the club, she said.

Kung Fu

At Feng Bo Zhuang near Wuhan’s bustling shopping district, workers in the 150-seat restaurant make no secret of their prejudices.

“My boss thinks the Japanese are way wrong on the Diaoyu islands issues, so he decided to put up the sign,” said a manager dressed in a Kung Fu master’s outfit who identified himself only by his family name, Zhong. “It’s also our way of marketing, because Chinese people were all angry.”

Japanese automakers can’t pin all the blame on political disputes as their cars have a lackluster reputation, according to Zhu Bin, an analyst at LMC Automotive. Sales at Toyota had been falling in the two months preceding the protests, while Nissan was underperforming the broader market.

All three big Japanese automakers say they want to project a cooler image to young Chinese drivers, and at the Shanghai show they introduced new cars and concepts that aim to do that.

Collateral Damage

“If you look at all the segments all around the world, the single biggest is ‘ba ling hou’” -- the Chinese term for people born after 1979 -- said Andy Palmer, an executive vice president with Nissan.

Liu Yefei, manager of a Honda dealership in Shanghai’s suburban Songjiang district, is banking on a recovery of Japanese brands to spur sales, though he acknowledges that may take some time.

“This is a tough issue,” Liu said in his showroom about 40 kilometers (25 miles) from the city center. “I hope relations will improve so we can have a better business environment.”

But with Japanese government officials again visiting the Yasukuni Shrine -- a ritual seen in Korea and China as tantamount to paying homage to war criminals -- the automakers and their employees continue to suffer collateral damage.

“We would rather leave the politics to the governments, but so far nothing has been settled,” Mizuno said. “This is a tough time for us to live in China.”

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