Politics and cars

In my recent trip to China I had the opportunity to talk about the car industry with some locals who are in the automotive industry. China's automotive industry boomed since 2002 and it has not slowed down since then. Anyone and everyone wants a car as no one really wants to ride a bicycle anymore.

The interesting fact is that in the recent case of China's spat with Japan over some tiny island off the coast of Eastern China has had a direct impact on the sales of Japanese cars in China. Most of us living outside China had no clue how great the impact was as the news reported are usually not accurate. It turns out that the Chinese are very patriotic and since the news broke out about Japan buying the islands, a lot of Chinese have stopped buying Japanese cars, some have stop going to work at Toyota factories in China and some even refused to go to work at Toyota dealerships in China.

Many Chinese have also started selling off their Japanese cars as they didn't want to be seen driving a Japanese car. The impact of this political tension between the countries have serious consequences for Japan. Japan's economy is already in bad shape and offending a major trading partner like China where almost 40% of all Japanese cars are sold is not a smart move. The repercussions are not limited to cars of course, all other items suchs electronics, food products and etc are all effected.

If no action is taken to resolve the tension between the two countries, Japanese car makers will suffer tremendously. European, Korean and American car makers are now enjoying bumper sales at the expense of the Japanese.


In ASEAN the situation is quite different. Despite Japanese occupation in the 1940s people in Malaysia still love to buy Japanese products. Often the Japanese made cars are viewed as good quality, reliable and easy to maintain with good residual value. Same goes for the Thais and the Indonesians. The political impact is more domestic rather than cross border. There is rumours of an imminent shake up in the automotive industry in Malaysia as the Malaysian people are eagerly awaiting for the upcoming General Election. If the Opposition Party wins, taxes on cars will be reduced creating massive change in the automotive industry. The direct impact will be on residual values and affordability of new cars. Have ridiculously high taxes imposed on cars and having an inefficient public transport system the Malaysian public are basically forced into buy cars. This is often questioned if the inefficient public transport system is deliberate to help the Government generate billions of dollar through tax revenue. We shall see come 2013 if there will be a change.