Quoting Department of Commerce figures, “Exports of new light vehicles from the United States are up 52% since 2002,” said Thomas Kitter of the Federal Reserve Bank of Chicago, “and exports of used vehicles are up almost four fold.”
Perhaps taking a clue from Kitter’s comments, Toyota announced on Feb. 9 that it was moving yet more production from Japan to the United States. Toyota will be investing $400 million to expand its Princeton, Indiana, plant to start building the Highlander Sports Utility Vehicle. Two of Toyota’s models — the Sequoia and the Sienna minivan — are already built there.
“The move will create 400 jobs at the Princeton factory,” said Toyota North American Operations President Yoshi Inaba at the Chicago Auto Show on Feb. 8. “We (also) plan to export some of those Highlanders to other countries. Our exports of Made-in-America products to 21 countries has topped 100,000 vehicles, and we’ve just begun exporting American Camry sedans and Sienna minivans to South Korea.”
The lion’s share of American automobile exports go to North American Free Trade Agreement (NAFTA) partners Canada and Mexico, but as Kitter notes, “Exports to Europe are up over 240% and have taken up the slack during the current recession as exports to Mexico and Canada have decreased. In addition to Mexico and Canada, the main destinations of American automobile exports are Europe and the Middle East.
Japanese automobile manufacturers have been battered during 2010, one of the worst years they have had in some time. In the two quarters from April to December, Japanese carmakers’ total net profit plunged 60%, according to the Nihon Keizai Shinbun; only Mitsubishi Motors achieved growth and moved into the black in Japan. However, Mitsubishi’s European operations are steadily declining, and they have reached a point where they are now trying to shut down all European production.
Hit by a triple whammy — the March 11 tsunami and earthquake, the Thai floods, and the sky-rocketing exchange rate that has seen the dollar fall from the glory days of 120 yen to the dollar into the range of 75 yen to the dollar — Japanese car makers are making an increased exit from Japan to less expensive markets. The Japanese call this the “hollowing out” of the Japanese automobile business.
However, exchange rates and natural disasters are not the only problems they face: Competition has toughened greatly and, in the current economic environment, all automobile manufacturing countries are looking eagerly to increase their exports.
Some Japanese manufacturers are feeling the effects more than others. Local production in Japan accounts for 70% of Mazda’s output, and exchange rate losses will probably push it into a deep year-end loss.
Japan’s problem is echoed worldwide. Present automotive manufacturing capacity outruns demand. The increasing electronic complexity of automobiles, along with calls for more ecological gas-sipping cars, have resulted in outdated factories worldwide and piled-high development costs.
Toyota’s Inaba sees more consolidation occurring in the automobile industry as a result: “You will see more automotive alliances as car makers stretch to meet the growing demands of consumers.”
For now, Toyota, and many other Japanese automobile manufacturers will continue their migration to NAFTA areas, where hardly a month goes by without an announcement by a Japanese manufacturer of moving production of one model or another from Japan to the United States, Mexico, or Canada.