Asia tension good for Detroit?

Chinese buyers have been shunning Japanese vehicles as a result of a territorial dispute. US automakers could pick up the slack.

By Benzinga Oct 16, 2012 2:46PM

Traffic copyright Pixtal, SuperStockBy Joe Young


 A territorial dispute over a chain of uninhabited islands in the East China Sea has caused a backlash against Japanese brands in China. 

Sales by Honda  (HMC), Toyota (TM) and Nissan (NSANY) in China have declined sharply, and Detroit automakers General Motors (GM), Ford (F) and Chrysler (FIATY) stand to benefit as a result.
 
Japanese vehicle makers saw sales fall 29% in September and analysts predict they will lose about a fifth of market share through the end of 2012, amounting to about 200,000 units.
 
Namrita Chow, an analyst for IHS Automotive based in Shanghai, predicts that General Motors will see an instant increase in sales and could make a profit of $200 million (based on earnings of $1,000 per vehicle) just by picking up the slack.
 
Although General Motors currently doesn't intend to increase production, other companies may seize the opportunity. So far in 2012, General Motors has sold over two million units in China. Ford has sold 428,000 units and announced plans to invest $5 billion in new plants and infrastructure. Chrysler does not release monthly sales totals and does not have any plants in China, but analysts estimate its sales at around 70,000 units.
 
In September, Toyota and other Japanese automakers shut down production plants in China due to the rising tensions. According to the Detroit News, the last time Detroit had a chance to grab market share in China was after the 2011 tsunami and earthquake, but as growth in China slows automakers are resisting the temptation to ramp up production of vehicles that might not be sold.
 
Chow believes that General Motors is one of the companies that stand to benefit as Chinese consumers have cash on hand and are refusing to purchase Japanese vehicles.
 
Shares of General Motors were moving higher Tuesday, after closing up 1.03% Monday. Year to date, the stock is up more than 20%. Toyota was up more than 1% Tuesday. It climbed 2.3% on Monday and is up more than 15% year to date. Ford shares were firmTuesday after closing up 2.4% Monday. Year to date, the shares are down 5.02%. Honda shares were up more than 1% Tuesday, having closed up 4.83% Monday. Year to date, Honda shares are up 1.6%.

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