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Dongfeng Motor eyes Japan

Posted by: Ian Rowley on November 27, 2006

Dongfeng Motors cannot be accused of lacking ambition. According to reports in Japan over the weekend, the Chinese automaker is planning to enter the Japanese market next year with a four-seater passenger sports car. According to the Nihon Keizai daily, Dongfeng is planning to offer a 2-3 liter model for about 10% less than models currently sold by Japanese automakers. The initial sales target is 2,000 a year.

That might not sound much but the move shouldn’t be underestimated. It would make Dongfeng it the first Chinese automaker to enter Japan. What’s more, it will test the company in arguably the world’s toughest auto market. This year auto sales in Japan have been down every month year-on-year. Meanwhile, overseas brands account for only one-in-twenty cars sold. Last week, I wrote an article looking at the difficulties faced by U.S. automakers in Japan, which have less than 1% share in Japan. Other foreigners, with the notable exception of German carmakers like BMW and Mercedes-Benz, fare just as badly. Korea’s Hyundai sold only 2,295 cars in Japan last year—four years after its Japan debut.

Whether Japanese will take to cheaper Chinese cars is far from clear. For one thing, evidence suggests that Japanese rarely buy foreign cars on price alone—hence the success of expensive German marques and failure of just about everyone else. And competition is such in Japan that undercutting the likes of Toyota, Nissan and Honda in Japan and still making a profit looks tough. Still, at least execs at Dongfeng don’t have to go far for advice. The company already partners Nissan and Honda in China and the Nikkei reports that Mitsubishi Motors will supply the engines for its Japanese cars.

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