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The Decline of Japanese Brands in China

Historical Dominance and Peak of Japanese Brands

Plates washed seven times, drinkable toilet water, and the spirit of craftsmanship—these were once hot topics associated with Japanese manufacturing. Over a decade ago, these topics highlighted the high quality of Japanese products, and some people even travelled long distances to Japan just to buy a toilet seat cover. However, the situation has drastically changed today. Japanese brands in China are gradually losing their competitive edge, over ten thousand Japanese restaurants in China close annually, and once-popular Japanese electronics brands are gradually fading from our sight. How did Japan’s manufacturing industry fall from its peak? Why are Japanese products no longer popular in China?

Rewinding to 1964, at the 16th Canton Fair, Toyota introduced its high-end model—the second-generation Crown—to Mainland China. At that time, China’s automotive industry was in its infancy, and the Toyota Crown was seen as a formidable contender. In that year, Toyota exported 60 Crown sedans to China for use in state guest receptions. By 1972, with the normalization of Sino-Japanese diplomatic relations, China reintroduced two more Crown cars specifically for hosting duties. Traditionally, the Hongqi has been recognized as the state guest car, but during that era, the Toyota Crown was the preferred choice. These transactions significantly raised the profile of Japanese cars in the Chinese market and were highly profitable. By 2008, Japanese automobiles had reached their peak in China, achieving a market share of 30.79%. This implied that three out of every ten new cars purchased in China were Japanese brands, with Toyota, Honda, and Nissan being highly recommended options for prospective buyers.

Decline of Japanese Automotive and Electronics in China

However, the good times did not last. Just over a decade later, Japanese cars began to lose ground in the Chinese market, with their market share plummeting from 30% at their peak to 17%, nearly halving. Some Japanese brands have disappeared, such as the once-popular Suzuki Swift, which is now rarely seen on the streets. Additionally, Mitsubishi, once a prominent player in the Chinese market where many domestic car brands used its engines, officially exited the Chinese market in 2023. The reason is simple: intense competition led to a strategic retreat. Some believe that after Korean and French cars, it is now the turn of Japanese cars to exit. A similar fate has befallen Japanese electronics. A decade or two ago, Japanese electronic brands were synonymous with quality and sales guarantees; many households’ first TV was a Sharp, the first air conditioner was a Panasonic, and the first radio was a Sony. However, these brands have since fallen out of favour. According to statistics from AVC, in the first half of 2023, Panasonic’s share of the Chinese air conditioner market was less than 0.3%, relegating it to a complete marginal player. Alongside Panasonic, Toshiba, Hitachi, Sharp, Sony, and other Japanese brands have struggled to adapt to the Chinese market. The 2012 China Household Appliance Consumer Insight Report shows that domestic brands such as Gree, Midea, and Haier are far more recognized among consumers than Japanese electronics brands. The underlying reason is cost-effectiveness. For instance, a 75-inch TV from a domestic brand costs about 3000 yuan, whereas a similar model from Sony might cost over 6000 yuan.

Challenges for Japanese Cuisine in China

In addition to Japanese brand cars and electronics, Japanese restaurants are also quietly withdrawing from the Chinese market. Following the Japanese nuclear wastewater incident, a large number of restaurants claiming to use imported Japanese ingredients came forward to clarify that all their ingredients were sourced from China and that only the cooking methods were Japanese. However, the decline of these establishments has been inevitable. Data shows that as of August 2023, there were nearly 106,000 Japanese restaurants in China, but over the past year, more than 14,000 have closed. The reasons for the decline are straightforward: high prices, small portions, and poor taste. For instance, a bowl of rich Chicken and Pork Bone Ginger Ramen was sold for 52 yuan by Hanamaru Udon, a brand under Yoshinoya, which announced its exit from the Chinese market in 2022. Moreover, a dish of chicken offal was outrageously priced at 1716 yuan, using chicken giblets that cost just a few yuan per kilogram at Japanese markets, yet marketed as high-end Japanese cuisine.

Rise of Domestic Brands Over Foreign Counterparts

From cars to electronics to dining, you’ll notice that over the past two decades, many Japanese brands in China have been steadily retreating. The promise of Japanese products being of superior quality no longer holds. A common underlying reason is that the quality once proudly associated with Japanese manufacturing has in recent years been overshadowed by scandals involving fraud. Notable instances include Mitsubishi in 2016, Kobe Steel in 2018, and Japan’s Kobayashi Chemical and Showa Denko in 2020, all of which were exposed for falsifying data.

Consumer Behavior and Market Shifts

In the automotive sector, domestic Chinese car brands now account for 60% of the market. These brands continually enhance their configurations, aesthetics, and pricing. The beauty industry is experiencing a similar trend. According to data from the 2023 China Cosmetics Yearbook, domestic cosmetics have captured 50.4% of the market share, while Korean and Japanese brands have seen their shares decline by 26% and 17%, respectively. As Korean and Japanese brands gradually recede, a wave of domestic brands is strongly emerging.

In the Chinese market, the decline of many foreign products is often attributed to patriotic sentiments, leading people to boycott foreign goods. However, fundamentally, it relies on the efforts of domestic products themselves. Domestic brands need to make breakthroughs in pricing, quality, and service, as consumers are not foolish. Consumers may show temporary enthusiasm due to patriotic feelings, but to secure a stable position in the commercial sector, it ultimately depends on whether the product competitiveness is strong enough. People look forward to more domestic products standing out, not just as secondary options but becoming the preferred choice for consumers. There is hope that domestic products will flourish and showcase their charm.

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