Japanese and Korean carmakers are partly responding to US pain: Toyota's sales fell 37 per cent year-on-year in December in the US, while Hyundai Motor's sales almost halved. Japan, also in recession, is fallow ground too. Passenger car sales fell 3.3 per cent last year, according to the Japan Automobile Manufacturers' Association, which is predicting a 5 per cent fall this year. Some forecasters reckon sales in China could actually drop after registering a 7 per cent increase last year.
Carmakers, increasingly forced to rely on emerging markets, hope this will not come to pass. Optimism is boosted by China's fiscal stimulus and other administrative measures being mulled by the government. These include a reduction in purchase taxes, which now make up 10 per cent of the cost price. Bulls also point to cheaper petrol, which could encourage sales among more price-sensitive buyers. Even so, enthusiasm should be tempered. China's car industry is still in a glut, and prices will likely continue to fall this year for mid and larger-sized cars. Competition is strong, and – as in other markets – protectionist measures have their allure. Already Beijing is considering plans to oblige government bodies to buy fleets of cars made by Chinese companies. Never mind Detroit. It's grim out east too.