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Automobile

Hyundai's skid in China opens lane for Japanese automakers

Nissan, Honda, Toyota pick up customers as political feud dents South Korean rival

Japan's Honda Motor has channeled lower development costs into price savings for SUVs in China.

GUANGZHOU -- Three major Japanese automakers have roared ahead in Chinese sales this year, recapturing once-wary customers with quality and cost savings as geopolitical tensions drive South Korea's Hyundai Motor off the road.

October sales climbed by double digits for Nissan MotorHonda Motor and Toyota Motor even as growth in the world's biggest new-car market sputtered in the 4% range. The Japanese trio appears certain to rank third through fifth in Chinese sales this year for the first time, trailing only the reigning pair of Germany's Volkswagen and America's General Motors, as Hyundai topples from No. 3 to around eighth or ninth.

Great fall

"We can lower the price by 30,000 yuan" ($4,500) on an Elantra sedan, a saleswoman offered at a Hyundai dealership here in early November. Playing hard to get prompted further enticement: "If you were to actually buy this car, we could bring it down even more."

Hyundai's sales in China plunged 40% on the year for January through October amid a boycott of South Korean goods in response to Seoul's deployment of the U.S. Terminal High Altitude Area Defense anti-missile system, which Beijing sees as a security risk.

The South Korean automaker has enjoyed great business in China for years, solidifying its third-place sales ranking. Hyundai won over influential people around the country, forming tight bonds with regional governments and capturing enormous public transport demand such as for taxis. But those methods have "completely backfired" amid the political troubles, said a source connected to the company.

Circling prey

Nissan, Honda and Toyota have taken best advantage of Hyundai's slump. The South Korean company's vehicles tend to be compact, with similar prices and designs to these Japanese rivals compared with automobiles from Western manufacturers.

The Japanese automakers began their attack at the start of the year, sensing they were uniquely placed to seize the opportunity presented by Hyundai's slide. They took out more online ads and exhibited products more often in Chinese cities and towns, thoroughly encircling their South Korean opponent.

"Hyundai's vehicle sales this year are expected to fall by as much as 900,000 across the entire group," said Tang Jin of Japan's Mizuho Bank, who is familiar with the Chinese market. "Much of that decline comes from customers flowing to Japanese automakers."

Chinese unit sales for October speak volumes. Hyundai moved 23.4% fewer vehicles year on year, continuing a trend of severe declines, while sales rose 18.2% for Nissan, 14.5% at Honda and 13.5% for Toyota.

Trimming costs

Yet political concerns were not the only factor, as cost-saving measures have recently become a strength of Team Japan. Honda, the most intent on such efforts, uses nearly the same chassis for its hot-selling Vezel and XR-V sport utility vehicles, which differ only in name and minor external design aspects.

Honda also shares many components among its vehicle types, roughly halving the costs of developing two lines of cars, based on back-of-the-envelope math. That leaves more room to slash vehicle prices.

The automaker's offerings "have gotten much more reasonably priced," said one 30-something visiting a Honda dealership in Guangdong Province. "With such a rich variety of SUVs, it's hard to choose which to buy."

A wave of anti-Japan protests swept China in 2012 as tensions flared over the Senkaku Islands, which China claims and calls the Diaoyu. Sales fell steeply then for Nissan, Honda and Toyota, even while growing for virtually all other overseas-based automakers. Hope for success in China seemed remote, but now Japanese automakers are rebuilding their presence.

China is nearing the age of the electric car, aided by broad support from Beijing. Though China's car market remains prone to political shifts, foreign automakers think Japanese companies will easily mount an offensive on the electric vehicle front. One sales official at a Western automaker predicted they would become troublesome rivals.

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