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Free Fall in Japan Car Sales Challenges Auto Imports

21 December 1998

Free Fall in Japan Car Sales Challenges Auto Imports; Foreign Manufacturers Position Products For Eventual Recovery

    WASHINGTON, Dec. 18 -- Sales of all imported passenger cars
in Japan have dropped 23.1 percent this year through October, the worst
decline in a decade. Yet, Japanese consumers have increased their purchases of
mini-cars whose sales have jumped 72.3 percent in November. However, importers
have been unable to take advantage of this potential market since none either
sell or have plans to sell mini-cars in Japan, according to Japan Auto Trends
released today by the Japan Automobile Manufacturers Association (JAMA).
    Nevertheless, importers are looking beyond the sales decline to position
themselves for recovery, especially in the small-car market. For example, Ford
Japan is planning to introduce its new European-built small car, the "Ka," in
February 1999. Small cars are the segment between mini-vehicles and large cars
according to Japan market definitions.
    Similarly, Mercedes-Benz Japan this year introduced to the Japanese Market
its A-class model, it's first small car. The cars have sold extremely well in
this difficult market with 6,500 orders through October.
    "This new focus on Japan's car market by global manufacturers such as Ford
and DaimlerChrysler suggests competition in Japan will become even keener.
Japan's narrow roads, limited parking and need for fuel efficiency means
Japan's consumers will continue to pay attention to smaller cars," said
William C. Duncan, General Director, JAMA USA.
    "Accordingly, those importers that successfully move into the small-car
market will be better positioned. Those that don't will find little
credibility in old arguments. They no longer will be able to claim that they
are limited by government regulations or need U.S. government pressure on
Japan to expand the number of import dealerships to achieve pre-set targets,"
Duncan added.
    Mini-cars are relatively inexpensive 660-cc vehicles. New government
safety rules now permit larger and safer mini-vehicles than have been
available in Japan. Mini-vehicle makers, Suzuki, Daihatsu, Mitsubishi, Fuji
(Subaru), Honda and Mazda, are forecasting an overall 10 to 20 percent jump
from a year ago in second half sales.
    The December Japan Auto Trends also highlights a study by Scott Latham
Associates that reports U.S. auto manufacturers have been closing unprofitable
showrooms in a move to become more efficient. The Latham analysis indicates
that U.S. automakers are seeking fewer, rather than more, dealerships in
Japan, despite their claims to the contrary.
    In addition, the newsletter explores what both Ford and Chrysler are doing
to reposition their products, revamp their marketing strategies in Japan and
bolster their investment in the Japanese auto industry.
    Japan Auto Trends is a quarterly publication examining developments in
Japan's auto market. The publication is available on JAMA's Web site --
http://www.japanauto.com.
    JAMA, headquartered in Tokyo, has offices in Brussels, Singapore and
Washington, DC.