TOKYO (majirox news) – With more automobile manufacturers located on its island than in almost any country on earth, how long can Japan support this teeming number of manufacturers as foreign competitors continue to learn Japanese techniques and as foreign exchange movements make it increasingly difficult for designers to build in Japan and export their cars?
In January 2011, car production companies saw a drop in their Japanese sales compared to January 2010. These companies included Toyota Motor Corporation, Nissan Motor Co.,Ltd., Suzuki Motor Corporation, Honda Motor Co.,Ltd., Mazda Motor Corporation, Daihatsu Motor Co., Ltd. and Fuji Heavy Industries Ltd., according to Asahi Shimbun. Four of these companies had minuses in the double digits. For example, Toyota Motors dropped 13% over the course of the year. In 2011, Nissan saw its lowest drop since 1971 with a 16.7% decrease since January 2010.
Manufactures partly blamed the drop on the end of the government’s incentives and subsidies, which ceased in October. Another source of the blame is the declining demand for cars in the Japanese home market.
Honda already seems to be throwing in the towel in Japan and is cutting back the number of models it sells in its domestic market.
“We are cutting back on the 26 models we sell domestically, including the Honda Civic,” said Tomohiro Okada, a spokesman for Honda. The Civic has lost popularity in Japan. The domestic market’s product mix has shifted to low-margin compact hatchbacks like the Honda Fit and the Nissan March.
According to Credit Swiss Auto analyst Issei Takahashi, Japan’s market has matured. Honda’s cost reduction will not make a big difference in its profits and will not affect its R & D. Honda needs to improve its technology. The company must take more risks, whereas it is currently acting more conservatively and less creatively, which is reflected in their products. In addition, Takahashi says that Honda isn’t coming out with any new models this year.
Meanwhile, Japanese companies continue to move manufacturing overseas. The strength of the yen is cutting the value of profits and makes Japan’s cars less competitive. Labor is also cheaper overseas, according to Takahashi.
Overseas manufacturing production has increased for five companies including Mitsubishi Motors, except for Toyota, Suzuki and Daihatsu.
“Honda is producing more cars overseas than the other makers, including Toyota and Nissan,” Takashashi says. “Over 60 percent of Honda’s cars are produced overseas. Honda’s motorcycle business is also going strong overseas, and they are expanding into developing countries as well.”
But Japanese companies also face more competition and products on the market. As Majirox News reported in a previous article, the Koreans are becoming a source of aggressive competition and have been producing interesting and affordable products. Ford has improved and U.S. cars have large engines, which provide more power and better performance; in effect – they are more fun to drive. In addition, the Italian and German cars are known for their style.
More competition makes it more difficult for Japanese companies to stand out, and the gap is closing between foreign and Japanese automakers.