The Nikkei newspaper reports that Japan’s big three car makers have cut production for China by half as the two countries remain at odds over ownership of a few small islands. Toyota Motor Corp. (NYSE: TM), Honda Motor Co. Ltd. (NYSE: HMC) and Nissan have suffered large drops in sales. Since China is the world’s largest car market, the dispute, which has caused the drop in demand, may hurt these firms nearly as much as the Japanese earthquake, if the dispute lasts for months.

Japanese car companies continue to play catchup in China behind market leaders General Motors Co. (NYSE: GM) and Volkswagen. Every large manufacturer in the world has set high goals for sales in the People’s Republic. The market share competition does not include China’s own car companies, which also are anxious to expand.

Douglas A. McIntyre