Some Taiwan-based carmakers could encounter sales pressure due to the intensified territorial dispute between China and Japan over the Diaoyutai Islands (釣魚台), US brokerage Morgan Stanley said in a report.
Located about 220km northeast of Taiwan, the Diaoyutais cluster, known as the Senkaku Islands in Japan, has been under Tokyo’s administration since 1972, but is also claimed by Taiwan and China.
The long-simmering territorial spat escalated to a new level on Sept. 11 when the Japanese government bought three of the uninhabited group of islands from their private owner in an attempt to reinforce its sovereignty claim, a move that triggered strong protests both in Taiwan and in numerous city across China.
“Recent protests in certain cities in China on the island dispute with Japan have raised concerns about the operations of Japanese automakers in China,” Lily Chen, a Taipei-based Morgan Stanley analyst, wrote in the report.
“Taiwanese auto companies have invested in China through manufacturing and dealerships, but most are under Japanese auto makers’ brands,” she said.
Chen said Taiwanese automakers Yulon Motor Co (裕隆汽車) and Yulon Nissan Motor Co (裕隆日產) may suffer greater impact because they are more exposed to the tension between China and Japan, which will also negatively affect sales of Japanese auto brands in China.
Although China does not contribute much to Taiwan’s Hotai Motor Co (和泰汽車) and China Motor Corp (中華汽車) profits, the current dispute is likely to act as a negative catalyst on sentiment toward Taiwan’s auto stocks in the near term, Chen said.
According to Morgan Stanley, Yulon Nissan has three joint ventures with China’s Dongfeng Nissan Passenger Vehicle Co (東風日產) to produce and sell vehicles in China under the brand of Nissan Motor Co of Japan.
The three joint ventures made up 77 percent of Yulon Nissan’s pretax profit in the first half of this year, the brokerage said.
Although orders from Dongfeng Nissan remain normal so far, Yulon Nissan — a joint venture between Yulon Motor and Nissan — said it has stopped major marketing campaigns in China.
Morgan Stanley said Yulon Motor will likely be affected by the China-Japan dispute as a result of its 48 percent stake in Yulon Nissan.
Meanwhile, Hotai is one of the dealers for Japanese automaker Toyota Motor Corp cars and its Lexus luxury vehicles in China, where Hotai has 19 sales and service locations, Morgan Stanley analysts said.
China Motor has a 25 percent stake in Southeast Motor Corp (東南汽車) of China, which manufactures and sells its own vehicles and automobiles made by Japan’s Mitsubishi Motors Corp, the brokerage added.
However, China accounted for less than 3 percent of Hotai’s and China Motor’s pretax profits in the first six months of this year, Morgan Stanley said.