Territory Clash Hurts Japanese Auto Interests in China

Japanese vehicle sales in China are suffering collateral damage from a dispute between the two countries over uninhabited islands in the East China Sea.

Japanese automotive joint ventures in China, including Dongfeng Honda and Dongfeng Nissan, have closed their production plants as the new tensions coincide with demonstrations marking the 81st anniversary of the Japanese invasion of Northeast China.

The conflict arose when the Japanese government announced earlier this month it had signed a contract with a family it said was the private owner of the Diaoyu Islands.

Japan's Chief Cabinet Secretary Osamu Fujimura announced the agreement to buy three of the five islands at a cost of ¥2.05 billion ($26.2 million).

The Diaoyu Islands are under Japanese control, but the Chinese claim the discovery and control of the islands from the 14th century. Japan had jurisdiction over the islands from 1895 until its surrender at the end of World War II. The U.S. administered the islands from 1945 until 1972, when they reverted to Japanese control.

Japan's sovereignty is disputed by both China and Taiwan.

The Chinese government-owned Xinhua news agency quotes Yang Song, deputy sales director with Guangdong-based Dongfeng Nissan, and Li Peng, deputy sales director for Hubei-based Dongfeng Honda, as saying the plants have been closed since Tuesday.

Nissan factories in Zhengzhou, in central Henan province, and in Guangzhou, also operated in partnership with Dongfeng, remain shuttered as well.

Li says Dongfeng Honda has closed 104 outlets across the country amid Chinese fury over Japan's purchase of the islands.

The auto maker has received 2,120 cancellations of car orders, and its inventory of unsold vehicles has soared to 13,838 units. “Workers may be given long vacations from now to the end of China's National Day holiday on Oct. 7,” Li says.

Xinhua reports the emergency response office of Dongfeng Motor says 148 cities across China have held anti-Japan protests, with people calling for boycotts of Japanese products. Gas stations in 28 cities are refusing to refuel Japanese vehicles.

“Analysis from Dongfeng Motor forecasts that if sales of its major JVs – Dongfeng Nissan and Dongfeng Honda – slumped by 30% during the September-December period, the parent company would see a reduction in this year’s sales by 150,000 units,” Xinhua says.

Reuters reports arsonists have damaged Toyota and Honda outlets in eastern port city of Qingdao.

 “The recent anti-Japan demonstrations are purely caused by the illegal ‘purchase’ of the Diaoyu Islands by the Japanese government,” Chinese Foreign Ministry spokesman Hong Lei tells Xinhua.

“They reflect (the) Chinese people’s strong appeals on protesting Japan's acts that undermine China's territorial sovereignty and promoting justice.”