Japanese Automakers Struggle to Keep Up with China’s BYD
The automotive industry is witnessing a significant shift in power dynamics, with China’s BYD Co. emerging as a formidable force. Recent sales figures reveal that Honda Motor Co. and Nissan Motor Co., two struggling Japanese brands, are struggling to keep up with BYD’s impressive sales numbers.
A Potential Game-Changer: Honda-Nissan Merger
Honda’s plans to acquire Nissan could be the key to unlocking the scale needed to take on BYD. With combined sales of over 6 million vehicles in the first 11 months of 2024, the merged entity would pose a significant threat to BYD’s dominance. This move could be a strategic response to China’s rise as the world’s largest car exporter, surpassing Japan last year.
Challenges in China
Both Honda and Nissan are struggling to contend with domestic automakers in China, leading to reduced staffing and production levels. Mitsubishi Motors Corp., which may also join the Honda-Nissan combination, has almost entirely pulled out of the Chinese market. Honda’s sales in China plummeted 28% in November, while output declined 38% year-on-year. Nissan’s China sales dropped 15.1% in November, with local production sinking 26%.
Impact of Share Repurchases
Honda’s recent ¥1.1 trillion ($7 billion) buyback announcement has raised concerns about the potential impact on its ability to invest in future growth. S&P Global Inc. warned that large-scale share repurchases do not contribute to strengthening the business base and result in capital outflows.
Global Sales Slump
Globally, Honda’s sales slipped 6.7% to 324,504 units in November, while output tumbled 20.4%. Nissan’s worldwide sales declined 1.3% year-on-year in November to 278,763 vehicles, with production taking a bigger hit at 14.3%. Toyota Motor Corp., the world’s largest automaker, also saw its global sales plateau in November, with a 0.2% decline versus November 2023.
Competition in Southeast Asia
Toyota’s hold on markets across Southeast Asia is being steadily eroded by Chinese competitors. The Japanese automaker is also facing intense competition over hybrid gasoline-electric cars in the US and locally made electric vehicles in China.
Toyota’s Response
Despite stagnating sales, Toyota’s investors were buoyed by a Nikkei report that the company plans to double its return-on-equity target to 20%. Shares in Toyota gained as much as 4.4%, although the company later clarified that it doesn’t have an explicit target or deadline for return-on-equity.
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