Daily Management Review

Sore Spot in Trump, Abe Meet is Japan's Love of Tiny Cars


02/10/2017




Sore Spot in Trump, Abe Meet is Japan's Love of Tiny Cars
While the path to balancing auto exports and imports will be no easier than it was in the 1980s, Japan's bulging automotive trade surplus will be a sore spot when Japanese Prime Minister Shinzo Abe meets with U.S. President Donald Trump.
 
The two leaders are unlikely to change the fact that the big cars and trucks that America makes do not sell in Japan even as Trump may press Abe to do more to level the trade imbalance with Japan during a White House visit or a round of golf.
 
Kei cars, which make up more than a third of the market in Japan, is preferred by many Japanese consumers who faced with congested cities and therefore favor tiny domestically-made vehicles. These cars have engines most Americans would consider inadequate for a motorcycle and are priced from around 1.1 million yen, or about $9,800.
 
Japanese consumers cannot be convinced to buy models that are popular in the United States even by Japan's Toyota Motor Corp and Honda Motor Co. Japanese consumer view to be too big small sport utility vehicles such as the Toyota RAV4 and Honda's CR-V.
 
Jeep SUVs made by Fiat Chrysler Automobiles accounted for three fourths of only about 13,000 vehicles from U.S. automakers sold in Japan in both 2016 and 2015. After selling just 2,400 vehicles in the Japanese market in 2016, Ford Motor Co announced last month that it is pulling out of the Japanese market entirely.
 
The sale volumes as well as vehicle size have shrunken in the Japanese auto market in recent years. And therefore China, the United States and growing emerging markets are the markets that global automakers, including Japan's, are focusing on for boosting sales.
 
"It would take a painstaking fine-tuning of vehicle specs to suit American cars to those driving and other conditions and develop a strong distribution network to be able to gain traction in Japan. It is nothing short of a 20-year effort," said a Toyota executive who spoke on condition he not be named.
 
Low sales of U.S. cars in Japan reflected "a total and absolute lack of effort over 50 years" by Detroit and did not mean it was a closed market, said Jaguar Land Rover Japan Ltd Chief Executive Magnus Hansson.
 
Still, for the big Japanese automakers, Japan remains an export hub. Some $52.6 billion was in vehicles and automotive parts was part of a $68.9 billion trade deficit between the U.S. with Japan in 2016, the U.S. Commerce Department has reported this week.
 
More than 90 percent of the Japanese market is controlled by Japan's automakers. The U.S. market is the world's second-biggest after China and last year U.S. automakers controlled only 45 percent of their home market.
 
The surge in investment by Japan's automakers in U.S. factories is a bigger factor than imports in the Detroit automakers' loss of U.S. market share since 1980. Toyota said that of all the vehicles Toyota sold in the United States, 56 percent were made in America last year. In the United States, it employs more than 34,000, Toyota said.
 
"(Trump) must bring Abe up short on any cheery notion that business will continue as usual," said Kevin L. Kearns, head of the U.S. Business and Industry Council. Smaller U.S. manufacturers, many of which feed the U.S. auto industry, comprise the group.
 
(Source:www.reuters.com) 






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