Honda sales hit by China backlash

Honda cut its full-year net profit forecast by a fifth after sales in China were hit by a popular backlash against Japanese goods, and warned it could be February before business in the world’s biggest autos market returns to normal.

The cut, prompted by a slump in sales amid often violent protests in a dispute about ownership of islands in the East China Sea, makes it likely that bigger Japanese rival Nissan, and possibly Toyota, will follow suit when they report quarterly earnings early next week.

“It’s likely Toyota and Nissan are going to cut forecasts in the same way. A cut was to be expected because the problems with China weren’t factored into forecasts,” said Fujio Ando, managing director at Chibagin Asset Management.

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Demand for Honda, Toyota and Nissan cars slumped in China in September as tempers flared in the territorial dispute, with South Korea’s Hyundai and Germany’s BMW picking up market share. Toyota has said its China sales dropped 49 per cent in September.

Sales by Honda and its China joint ventures dropped 40.5 per cent last month. China is Honda’s second-biggest market after the United States, accounting for 17 per cent of 2011 sales.

Honda said yesterday that its two biggest China plants would continue to run on one shift, rather than two, until at least the middle of next month, with output then gradually picking up ahead of Chinese New Year in February – a traditional buying season.

It cut its full-year China sales forecast by 17 per cent to 620,000 vehicles.