While Nissan Motor Co (7201.T), Honda Motor Co (7267.T), Toyota Motor Corp (7203.T) and Mazda Motor Corp (7261.T) count the cost of lost sales and dented profits from a violent anti-Japanese backlash in September, industry experts say now is the time to strike deeper into the world's biggest autos market rather than limp away and lick their wounds.

Paul Gao, a Hong Kong-based researcher at U.S. consultant McKinsey & Co, said the damage to Japanese brands should prove to be a "temporary phenomenon" as tensions were heightened in the run-up to this month's 18th Communist Party Congress - China's once-in-a-decade leadership change.

"Over the medium- to long-term, the Japanese (market) share in China will recover because for customers, especially those buying cars with their own money ... the nationality of the brand is not a major consideration, whether it's Japanese, Korean, whatever. In the end, they think about performance, styling, fuel economy and safety," Gao said, adding it would be a mistake for the Japanese to shift focus away from China.

He said the Japanese should now be "doubling their efforts" to win back China market share from Volkswagen (VOWG_p.DE), General Motors (GM.N) and Hyundai Motor (005380.KS), as more drivers are now getting around to replacing their cars.

"For their first car, as they had no ownership experience, they gravitated towards flashy cars and were impressed by advertising and sales campaigns. Now they are looking for something more rational - quality, safety, durability - areas where Japanese brands like Toyota excel," he said.

Demand for leading Japanese car brands in China virtually halved last month, cutting Japanese firms' market share to 17 percent from 19 percent at end-August.

MARKETING SWITCH

Blaming the China impact, Nissan - the most exposed of the three big Japanese automakers to China - cut its full-year net profit forecast by a fifth, while Honda also revised down its forecasts for the year by 20 percent. Toyota, also badly hit in China, managed to increase its annual profit forecast as it is less exposed to that market. China accounts for 27 percent of Nissan's total vehicle sales, a fifth of Honda's sales and 12 percent of Toyota's global sales.

Mazda said on Thursday it expects its China car sales to fall by more than a third this month from a year earlier, dragging fourth-quarter sales down by around 40 percent, but the firm's China chief, Noriaki Yamada, hoped China would be back to 'business as usual' by the end of March.

Speaking on the sidelines of the Guangzhou autoshow in southeastern China, the first major industry event since the anti-Japanese protests, Yamada said Mazda was also changing tack on the way it markets its brand in China - preferring a more direct and personal touch than traditional mass media advertising.

"We need to increase the opportunities where we and our customers can directly interact," he told reporters, noting Mazda would invite more potential buyers to test drive its cars, take part in more of China's local auto shows and further expand its dealership network. "We think it's better to allocate our budget on these events rather than on advertising."

COMPENSATION

In a bid to win back the hearts and wallets of Chinese drivers weeks after Tokyo's nationalization of two islets - known to Chinese as the Diaoyu and to Japanese as the Senkaku - Japan's carmakers have compensated car owners and dealers for damage and injuries incurred during the protests - though this has been a low-key campaign as they don't want to invite a flood of unrelated claims. None of the carmakers has said how many cases are involved or how much they expect to pay out.

"We need to shoulder responsibility if they face challenges," Ren Yong, vice president of Nissan's local joint venture with Dongfeng Automobile Co Ltd (600081.SS), told reporters at the Guangzhou event. The venture said it will offer a new car to buyers returning a vehicle over a quality issue - within 7 days of purchase and with mileage below 1,000 km.

While recovery in China will be helped by a softening yen - the Japanese currency has weakened to 82 to the dollar from around 77.5 in late-September, making exports more competitive - it could be the Japanese firms' quality, value-for-money and cost management that seal the recuperation.

"Japanese firms may not produce the most eye-catching products or brand marketing campaigns, but they invest in the long-term relationship with suppliers to improve the cost structure and improve the quality. This is what Americans and Germans don't do that well," said McKinsey's Gao.

(Additional reporting by Fang Yan in Shanghai and Yoko Kubota in Tokyo; Editing by Ian Geoghegan)

• A Permanent Economic Emergency