In contrast to developed countries, China's potential remains vast even if the growth of overall sales has slowed from 2009 when it reached a heady 45 percent. For every 1,000 people, car ownership is at 800 people in the U.S. and 600 in Europe and Japan, but a mere 50 in China.
Big business is expected in what are called second and third-tier cities, less developed than Beijing or Shanghai, and where people are just starting to think about owning cars as incomes rise.
Winning in the Chinese market is likely to depend on other factors as well, such as the strength of dealerships, the appeal of model lineups and the management of recalls, analysts say. The Japanese must overcome their current sales difficulties and also deal with tough competition from European and U.S. rivals.
Volkswagen AG of Germany, the biggest selling automaker in China, is investing 9.8 billion euros ($12.7 billion) through 2015 in its China business, mostly for fuel-efficient vehicles, and had pianist Lang Lang and Hollywood star Keanu Reeves at a gala event Friday evening to woo Chinese buyers.
Namrita Chow, senior analyst at IHS Automotive in Shanghai, said U.S. automaker Ford Motor Co. and Hyundai Motor Co. of South Korea were best able to take advantage of Japanese sales woes and increased market share in China.
Toyota Motor Corp., whose March sales in China were down 12 percent from a year earlier, is hoping to win over China with its gas-electric hybrids, a technology it pioneered with the Prius.
China is increasingly concerned about energy efficiency and pollution, and Toyota is hopeful that hybrids will catch on with Chinese buyers. Rapid growth in car sales has left Beijing, Shanghai and other major cities choked on traffic and smog.
By the end of 2015, or early 2016, Toyota is planning to start selling two hybrid models in China, developed by a special team for the Chinese market, in which the core part of the hybrid system will be totally made in China.
Tadashi Yamashina, Toyota Motor Engineering & Manufacturing (China) Co. President, acknowledged the company was taking a risk with pushing hybrids in China where such vehicles are currently a tiny proportion of sales. But he believes the technology is well suited for the country as long as it is affordable. Toyota did not give sales prices or production numbers for the planned models.
"The era of hybrids is almost certain to come. It has taken off in the rest of the world," he said. "Besides, it will be good for China."
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