Nissan winning with local content, flexible sourcing

BEIJING - As parts supplies recover and production is back on track, Japan's carmakers have regained sales momentum three months after the devastating earthquake and tsunami in March.

In June, the biggest Japanese carmaker Toyota Motor Corp sold 59,500 vehicles in China after selling only 38,500 in May. [Photo/China Daily]

In June the biggest Japanese carmaker Toyota Motor Corp sold 59,500 vehicles in China, 55 percent more the previous month, but still down 2.4 percent from a year earlier.

Toyota sold only 38,500 cars in China in May due to a sharp decline in output.

For the first half of this year, Toyota reported a 2.2 percent year-on-year decrease in sales to 354,000 units.

Normal levels

The company's China operation spokesman Niu Yu told China Daily that production at Toyota's local factories with FAW and Guangzhou Automobile have almost resumed normal levels with two shifts a day.

"In July, we expect continued month-on-month growth," Niu said, noting that the company will hold to its original target of selling 900,000 vehicles this year.

Honda Motor Co moved 35,105 vehicles in China last month, a 29 percent increase over May, when the company delivered only 27,200 vehicles.

But compared with the same period last year, Honda's June sales were down 30 percent. For the first half of the year, its tally declined 12 percent from 2010 to 271,000 units.

Spokesman Zhu Linjie told China Daily that Honda's production recovered to pre-earthquake levels this month.

"We will do our best to recoup the loss in the first half," Zhu said, but added it is difficult to maintain the carmaker's original target of 730,000 units in China this year.

He said the company will try to at least surpass its 2010 sales of 650,000 units.

Nissan Motor Co was the Japanese carmaker least impacted in China. It sold the most vehicles of any Japanese brand - about 108,000 units - in June, an increase of 22 percent from a year ago.

In the first six months ending in June, Nissan moved nearly 600,000 vehicles in China, up 18 percent over the same period in 2010.

The company plans to deliver 1.15 million vehicles in the country this year.

High localization

Analysts said Nissan's strong performance can be attributed to highly localized vehicle content, an open supplier system and quick maneuvering of its global resources.

"Nissan buys up to 90 percent of the parts locally that are used at its China plants," said Bill Russo, a Beijing-based senior adviser at consulting company Booz & Co.

"As a result, it was not as exposed as some of its Japanese competitors to supply chain disruptions resulting from the Japan earthquake."

Toyota and Honda traditionally have exclusive components suppliers in which they hold majority shares, but Nissan has a different approach and is able to quickly find alternative suppliers in an emergency, said Zhu Ming, a senior analyst of market researcher JD Power.

"It enhances the carmaker's ability to withstand risks," he said.

Lin Huaibin, an automotive analyst at consultancy IHS, said Nissan's alliance with French carmaker Renault has resulted in a more open supplier system compared with other Japanese manufacturers.

Lin said that the company is also doing better in quickly sourcing parts worldwide to meet the demand in China.

In addition to Nissan's quick restoration of its parts pipeline and full production, robust demand from middle class buyers, strong brand positioning and fast access to high-growth second- and third-tier cities are all providing the carmaker a solid foundation to expand in China, Russo from Booz & Co said.

Lin from IHS forecast that Japanese carmakers as a whole will not register significant increases in China throughout the year, but as production recovers, they might pull even with last year's figures.