Japanese cars are no longer Chinese favorite car

Text|Wang Jingyi, Deng Xia

Edit | Shi Zhiliang

What is the best-selling model in China?

For a long time, this title belonged to Dongfeng Nissan Xuanyi. In 2020, Xuanyi sold a total of 541,000 units, and in 2021, it sold 513,000 units, ranking first in China's automobile sales ranking due to its low fuel consumption and strong riding comfort.

But from 2022, Xuanyi's first China was pulled down by BYD Song.

In 2022, the most sold model in China was the BYD Song, with a cumulative total of 479,000 units sold throughout the year, a year-on-year increase of 137.4%. Xuanyi ranked second, with sales of 421,000 units, down 18.0% y/y.

Xuanyi's encounter is the epitome of the entire Japanese car - fuel vehicles are replaced by new energy vehicles, and overseas brands are replaced by domestic cars, which has become an increasingly clear trend in the automotive industry.

In the past three years, the market share of Japanese cars has decreased from 24.1% in 2020 to 17.6% in the first half of 2023, a decrease of 6.5%, the most significant decline of all categories. At the same time, the market share of independent brands has been rising, from 35.7% in 2020 year by year, and has reached 49.5% in the first half of 2023, and is expected to break through the 50% critical point within the year.

"Fuel saving" and "cost-effective" are the characteristics of Japanese cars, but with the popularity of hybrid models represented by BYD Song DM-i, the market share of Japanese fuel vehicles is constantly being squeezed out by new energy vehicles.

Gong Min, head of automotive industry research at UBS China, told Caijing Auto (ID: carcaijing) that the current share of Chinese car companies in China's local market is 50%, of which the market share in fuel vehicles is more than 30%, and the market share in electric vehicles exceeds 80%. With the transformation of China's auto market to electrification around 2030, the share of Chinese car companies in China's domestic market can reach 80%.

01 Sales of Japanese automobile brands declined

In the past three years, the market share of Japanese cars has decreased from 24.1% in 2020 to 17.6% in the first half of 2023, a decrease of 6.5%, the most significant decline of all categories.

Statistics from the National Passenger Vehicle Market Information Association show that the market share of almost all overseas auto brands has declined in the past three years.

Among them, the market share of the German system fell from 25.5% to 21.4%, and the decline of 4.1% was second only to the 6.5% of the Japanese system; The decline in market share of the US department was not so obvious, from 9.4% in 2020 to 8.5% in the first half of 2023; South Korea's market share fell from 3.8% to 1.7%; The market share of French and other European systems was already very low, with legal systems increasing slightly from 0.3% to 0.4%, while other European systems slightly decreased from 1.2% to 1.0%.

At the same time, the market share of independent brands has been rising. From 35.7% in 2020, it reached 41.2% in 2021, continued to climb to 47.3% in 2022, and reached 49.5% in the first half of 2023, and is expected to break through the 50% critical point within the year.

Cui Dongshu, secretary general of the Passenger Association, believes that Japanese cars have always been the main "fuel-saving" label, and their positioning is similar to that of new energy vehicles. Therefore, the rapid development of the new energy vehicle market has actually had a diversion and substitution effect on Japanese cars. Under a number of diversions, the market share of fuel vehicles of Japanese car companies is being rapidly divided.

Toyota, Honda and Nissan, the three major Japanese car brands, have seen a significant decline in sales in China.

Data show that Honda's cumulative vehicle sales in the first half of this year were 529,700 units, down 22.0% from the same period last year, and Toyota's sales in China in the first half of the year were 879,400 units, down 2.8%.

Nissan Motor announced on July 26 that it expects sales in China to fall by 23% to 800,000 units in FY2023, lower than its original plan (up 8% to sell 1.13 million units).

Other Japanese car companies are not having a good time. Mazda's sales in the first half of the year reached only 32,200 units, down 49.4% y/y. Mitsubishi Motors' sales volume in 2022 was 33,600 units, and in June 2023, it officially entered the temporary suspension phase, and optimized the personnel structure according to the actual situation.

"The market share of foreign brands in China is a process of decline, and luxury car companies will be better than Mass Market car companies." Gong Min told Caijing Auto (ID: carcaijing).

Lexus is a representative of the old Japanese luxury car and has a good market base in China. As an all-imported car brand, it has ranked first in imported car sales for many years, of which the sedan Lexus ES is the sales leader.

From 2020 to 2022, Lexus sold 235,000, 219,000 and 184,000 vehicles in China, respectively, with sales declining slightly year by year. In the first half of 2023, the decline continued, with a total of 70,500 units sold, a decrease of 20%.

Zeng Zhiling, director of forecasting at GlobalData Greater China, put it more clearly that China's new energy vehicle brands are rising rapidly. Seize Lexus' market share in China, and the user groups between "Wei Xiaoli" and Lexus have a high degree of overlap.

02 The "myth" of used car value preservation may be broken

The more new cars are sold, the better the used car retention rate. With the decline in market share, the "myth" of maintaining value of Japanese cars in the past is also being broken.

In the past, Japanese cars were known for preserving their value. According to data from the China Automobile Association in the first half of this year, in the top 20 list of value retention rate, Lexus ranked second, Toyota ranked third, and Honda ranked eighth.

However, compared with previous years, the myth of maintaining the value of Japanese cars is being broken. Caijing Auto (ID: caijingqiche) noted that the three-year value retention rate of Japanese cars will reach 79% in 2022, and only 67.52% in the first half of 2023, a decrease of nearly 12%.

Specifically, the retention rate of Lexus decreased by 15.91% year-on-year, the retention rate of Honda decreased by 15.54% (including Dongfeng Honda, Honda and Guangqi Honda), and the average value retention rate of Toyota decreased by 14.18% (including FAW Toyota, Toyota and GAC Toyota).

▲ Changes in the three-year retention rate of second-hand cars of major mainstream brands

Relatively stable prices, coupled with a growing market share, have been the key to the popularity of Japanese cars in the used car market. However, under the vigorous "price war" this year, the price advantage of Japanese cars has become unsustainable.

The first is the squeeze on the used car market due to the price reduction of new cars. Since the beginning of this year, Japanese cars such as Honda and Toyota have also begun to reduce prices "with the flow" and exchange prices for sales. In particular, Dongfeng Honda has reduced the price of various models by 10,000 to 70,000 yuan in the form of manufacturer subsidies and government subsidies. Among them, Honda UR-V has the largest subsidy, with a total of 68,000 yuan for the two subsidies.

According to netizens, the new Honda Civic car with a starting price of 129,900 yuan has even been quoted by dealers to 89,900 yuan. According to the three-year value retention rate of 68.98%, the price of second-hand cars is also 89,600 yuan, which is only 3,000 yuan cheaper than new cars, far less attractive than new cars.

However, the market space brought about by the decrease in the circulation rate of second-hand cars has not been fully absorbed by the brand's own new car market. While Japanese cars are reducing prices, their market share is also shrinking.

"The plug-in hybrid models that have been popular in the past two years are constantly seizing the market share of fuel vehicles of Japanese cars." Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, pointed out.

Lang Xuehong said that the mainstream price segment of Japanese cars is in the range of 100,000-200,000 yuan, and consumers who choose this market are more sensitive to price. Starting in 2022, the plug-in hybrid market will also show strong growth, which basically coincides with the mainstream price segment of Japanese cars, but it has obvious advantages in purchase price and cost of use, resulting in more Japanese fuel vehicles being replaced by plug-in hybrid models.

03 Mainly hybrid models, Japanese brands are actively fighting

At present, the volume models of Japanese car companies are still classic models in the past, and no new explosive models have appeared in recent years. Taking GAC Toyota as an example, the sales "bearer" is still the three flagship models of Camry, Highlander and Xena, accounting for nearly half of the total sales.

Taking the former sales guan Xuanyi as an example, in August 2023, the sales volume of Xuanyi was 32,894 units, and the total sales volume of Dongfeng Nissan in a single month was 54,979 units, and Xuanyi accounted for 59.83% of the brand's total sales.

In the Chinese auto market, how do Japanese brands fight? More and more competitive new energy models have become the key, especially hybrid models.

▲ Toyota electric vehicle billboard in Shanghai subway station, photo by Wang Jingyi

In May this year, Dongfeng Nissan, FAW Toyota and Guangqi Honda took action one after another, successively launching new cars such as the super-hybrid X-Trail, the new Corolla, and the all-new Accord.

For example, Dongfeng Nissan's super-hybrid electric drive X-Jun, priced from 189,900 yuan, realizes the "same price for fuel and electricity" (the price of hybrid models and fuel vehicles is the same), the whole series is equipped with a dual-motor four-wheel drive system, and emphasizes the characteristics of the second-generation e-POWER technology without energy anxiety and 100% electric drive.

According to China Automotive News, since its launch in May, more than 300 super-hybrid electric drive X-Trail have been ordered in Beijing, and some color and configuration models are currently not in stock. The Dongfeng Nissan super-hybrid Xuanyi, which was launched in March, has also won the first place in monthly sales of sedans for many consecutive months.

The Accord, a representative of the Honda brand, has been released to the 11th generation, and this is also the first plug-in hybrid version. On the basis of great changes in the overall design, the price of the gasoline version of the new generation Accord is 17.9-228,800, and the price of the new energy version is 22.5-258,800.

Transforming existing fuel models into hybrid versions is undoubtedly a pragmatic market competition strategy. "In the short term, Toyota's main sales products are still hybrid models. However, we will focus more on R&D, sales, channels, logistics, upgrading and strengthening of partnerships, etc. Toyota Chinese said to Caijingqiche (ID: caijingqiche).

Although hybrid models are the main ones in the short term, pure electric models are still a must-have. Caijing Auto (ID: caijingqiche) noticed on the streets of Shanghai that FAW Toyota has placed a large number of advertisements for pure electric models such as the bZ3, and has a strong determination to transform electrification.

Dongfeng Honda also recently announced that it will fully participate in the new era of intelligent electric vehicles, according to the plan, by 2027, no new fuel vehicles will be released, and by 2030, more than 10 pure electric models will be launched. e:PHEV plug-in hybrid, e:HEV gasoline-electric hybrid, e:NP pure electric vehicle models will cover every market segment. Guangqi Honda's new low-carbon electric vehicle plant will start operations in mid-2024, with an annual production capacity of 120,000 units.

It is undeniable that after years of rapid growth, Japanese automobile brands are now encountering structural sales difficulties, but the advantages of brand and supply chain for many years are still solid, and with the launch of more competitive new energy models, the recovery of sales is also worth looking forward to.