Sales of Japanese cars in China plummeted over 40 percent on-year in September amid a territorial spat over a group of islands in the East China Sea. The fall is even bigger than the one Japanese carmakers suffered when their country was hit by a massive earthquake and tsunami last year.

Industry figures show that Toyota's sales volume in China fell 49 percent on-year last month, Honda's 41 percent, and Nissan's 35 percent. Matsuda, Mitsubishi and Suzuki also posted a 35-63 percent drop in sales there.

Due to the sluggish sales in China, Japanese carmakers are expected to record poorer performances for the whole year. Toyota's sales in China accounted for 12.4 percent of the total last year.

The blight could last until the end of the year, said a Chinese car industry insider. Japanese carmakers took up 23 percent of the Chinese market last year, but the insider said this could fall to 20 percent.

Meanwhile, non-Japanese carmakers are posting sales growth in China. According to Bloomberg, sales of the Volkswagen Audi grew 20 percent on-year last month, and Hyundai-Kia, the No. 3 in the market, also saw sales there expand 9.5 percent.