Toyota (TM.US) and other Japanese car companies saw a collective decline in sales in February, and the Middle East conflict is evolving into a greater challenge for supply chains.

Toyota Motor Corp. Sponsored ADR (TM.US) announced on Monday that global sales in February decreased by 2.3% year-on-year to 806,905 units, with sales in the Chinese market dropping by 13.9% and production decreased by 11.5%, mainly due to the timing of the Spring Festival holiday. This performance decline occurred before the outbreak of the Iran conflict on February 28, and does not yet reflect the impact of the situation in the Middle East on the supply chain. In addition, Toyota's joint venture in China plans to recall over 560,000 sports utility vehicles to address a potential defect in the second-row seats that could endanger passenger collision safety. According to the announcement from the China State Administration for Market Regulation last Friday, Toyota and its Chinese partner Guangzhou Automobile Group Co., Ltd. will recall 317,990 units of the Highlander model from April 1. Toyota's joint venture with China FAW Group Co., Ltd. will also recall 242,170 units of the Crown SUV. A Toyota spokesperson stated that this recall is part of a global recall plan for approximately 1.23 million vehicles. According to the company, the number of affected vehicles in North America is roughly equivalent to that in China. It is worth noting that the Iran conflict is becoming a greater challenge for the Japanese automotive industry. Approximately 70% of Japan's aluminum materials for automobile manufacturing rely on the Middle East for supply, and with increased uncertainty in the supply chain, car manufacturers have gradually reduced production. The Japan Automobile Manufacturers Association stated earlier this month that the conflict has begun to affect component delivery and supply. The association noted that by 2025, Japanese manufacturers export approximately 800,000 vehicles to the Middle East, valued at around 2.5 trillion yen (approximately $25 billion); if shipping routes are redirected from the blocked Strait of Hormuz to via South Africa's Cape of Good Hope, delivery times will increase from about 50 days to nearly 100 days. Reports indicate that Toyota and Nissan have planned production cuts in March, while Honda (HMC.US) plans to offset the decline in exports by increasing local production in the Americas, Japan, and Thailand. Specifically, Honda Motor Co., Ltd. Sponsored ADR announced on Monday that its global sales in February decreased by 6.6% year-on-year to 249,414 units, with a 15.2% decrease in the Chinese market. Nissan's sales for the same period decreased by 7.4%, with a significant decrease of 19.4% in the Chinese market.