Japan Car Cos Renew European Offensive

Japanese exports to Europe surged 32 per cent in the 11 months to November, according to the latest figures from Japan Automobile Manufacturers Association. We are not happy at the moment about the trend in auto trade, says Anthony Millington, representative of ACEA, the European industry association, in Tokyo.

This is the clearest indication the Japanese are exporting their way out of their troubles at the expense of somebody else. But a bigger threat to European carmakers is likely to be from the transplants the Japanese are busy building in the region.

Earlier this month, Toyota unveiled plans to invest 150m ($241.5m) and expand engine production in the UK. The extra investment follows its decision to invest FFr4bn ($656.8m) in a second European car plant in northern France to produce 150,000 new vehicles a year. Announcement of the new factory created a stir among European carmakers, concerned about rising over-capacity in their home market. Toyotas expansion is the latest and most conspicuous move by Japans leading carmakers to step up their presence in the region.

 

Nissan, which spearheaded the Japanese foray into Europe, is expanding its facility in the UK and will be producing 100,000 units of the Almera there from 2000 onwards.

Honda is likewise expanding output at Swindon, also in the UK, from 100,000 to 150,000 next year; Mitsubishi Motors, which has a joint venture with Volvo in the Netherlands, will increase output by 50,000 next year. Japanese capacity in Europe will rise by 300,000-350,000 over the next four years. The investments reflect a resolve among Japanese carmakers to win a greater slice of the European market.

Our presence in western Europe is extremely unsatisfactory, says Yoshimi Inaba, Toyotas director in charge of Europe and Africa. Mr Inaba intends to strengthen Toyotas western European sales and win 5 per cent of the market. Nissan is no less determined to expand sales in Europe.

Considering how much we have invested in Europe, the region has become very important, says Akio Sumitomo, Nissans director in charge of European business.

In addition to moving production of the Almera to Europe, the company is planning to produce a new multi-purpose vehicle as well as diesel engines and transmissions in Spain. So, we must sell more vehicles, Mr Sumitomo emphasises.

He wants to raise Nissans unit sales in Europe from 450,000 last year to 550,000. A 10 per cent increase in sales this year means that already, the company is inching towards 500,000 unit sales.

To support its European drive, Nissan has appointed Earl Hesterberg, who was instrumental in building up its US sales, as vice-president of European sales. Honda has targeted sales of 300,000 by the year 2000, a rise of 36 per cent.

While Japanese carmakers play down fears they are launching an export offensive to counter weak demand at home, exports could grow further once a monitoring agreement between Japan and the EU expires in 1999.

The quota has not been reached over the past few years, but the recent surge in exports to Europe means Japanese carmakers are likely to fill their export quota for the first time in years, said Ed Brogan, industry analyst at Salomon Smith Barney in Tokyo.

Concern among EU carmakers has led to calls for a continuation of the export curbs. For Japanese carmakers, expansion in Europe is important at this point in their global business strategy, mainly due to the mature domestic market. The share of Japanese sales in the US has reached a politically sensitive level of about 24 per cent. Raising exports to expand sales has become increasingly risky. The situation raises the importance of Europe as an export market to soak up excess production in Japan and maintain domestic capacity utilisation. n

The good thing about the Capella, which is also sold in Europe, is that if we fall short in Japan, we can direct that to Europe, admits Ronald Leicht, senior managing director of Mazda. The potential for higher sales in Europe is also an attractive factor. The European market is about as big as the US. But our business is, unfortunately, not as big in Europe, says Mr Sumitomo. Manufacturers have no illusions about the difficulties they face in the European market. We believe our quality is better than that of European car makers, says Mr Inaba at Toyota. But loyalty to national brands and lack of familiarity has meant many Europeans have not got the message. One of the greatest challenges Japanese carmakers face in Europe is to improve their brand image, he says. Japanese producers have been successful at exploiting market niches. Toyotas RAV4 and Hondas CR-V are sports utility vehicles European car makers do not offer. This year, Mazda is exporting its highly popular small MPV, the Demio. Daihatsu, a much smaller company, has also had success with its Move and Grand Move multi-purpose vehicles. You have Japanese companies that were never really that popular in Europe selling cars that were popular in Japan to the Europeans, said Christopher Redl, industry analyst at ING Barings in Tokyo. The benefits of a weak yen allow the Japanese to use the currency gains to plough them into Europe for marketing purposes, Mr Redl points out. The first-hand knowledge they have gained about the European market is helping them raise cost competitiveness, Mr Sumitomo declares. Japanese carmakers are able to bring products much faster to market than their European rivals. The Europeans are not prepared for the highly efficient manufacturing capability of the Japanese, Mr Redl warns. Copyright Financial Times Limited 1998.

But EU manufacturers claim they are trying to export their way out of their troubles, writes Michiyo Nakamoto