Dongfeng Motor Group hurt by Sino-Japanese political tensions

Hardest hit were Dongfeng’s JVs with Nissan and Honda.

CIMB noted:

Data released by management today shows a 19% yoy decline in Dongfeng’s Sep’s PV sales to 128k units as ongoing Sino-Japanese political tensions spilt over to consumer sentiment on Japanese autos. As expected, Dongfeng’s JVs with Nissan and Honda were the hardest hit as sales fell 44% yoy and 19% yoy respectively.

Dongfeng’s JV with Peugeot-Citroen fared better, gaining 9% yoy to 43k units. Commercial vehicle (CV) sales fared poorly as well with Sep sales down 33% yoy, led by concerns over slowing Fixed Asset Investment (FAI).

We lower our FY12 sales volumes for Dongfeng Nissan and Honda by 4% and 5% respectively in view of the dampened sentiment on Japanese auto brands. However, we view this as a temporary sales blip.

Our conversations with numerous dealers of Japanese brands in China suggest that showroom traffic in the first week of Oct had improved markedly from the last two weeks of Sep. This leads us to believe that buying sentiment on Japanese autos will pick up swiftly should the two governments reach a political understanding.