The importance of Asia for Japan's automakers

Posted by: Ian Rowley on February 25, 2008

Can Japan’s automakers withstand a slowdown or worse in the U.S. Japan and Western Europe? You bet they can. Hot on the heels of healthy quarterly results for the three months ended December, more signs are emerging that rising demand in Asia will offset troubles in the mature markets.

Sunday’s Nikkei, Japan’s biggest business paper, reckoned that this year, for the first time, sales in Asia outside Japan will be more than sales at home for Japan’s automakers. In 2008, sales in the region are projected to rise 700,000 to 5.5 million units, besting Japan sales which were 4.94 million in 2007 and unlikely to grow anytime soon. Just as important, that’s not too far away from the 6.8 million vehicles sold by Japanese automakers in the U.S. in 2007. Unsurprisingly, China looks like being one of the big drivers of growth with Toyota, for example, projecting a 40% increase in sales this year to 700,000 vehicles.

While that’s good news for sales and earnings, rising Asia sales my yet cause a few headaches. One big challenge will be how to manage the growth. Management resources are already spread and the fear is that rapid growth in Asia could put more pressure on quality. Analysts also reckon that Japan’s automakers may eventually have to revise their strategy of conducting the lion’s share of design and development work in Japan, yet it’s far from clear how quickly that could happen. On the one hand, R&D has become much globalized in recent years as companies increased efforts to meet with the needs of local markets. On the other, a rash of investment in new facilities in Japan means its central role is unlikely to diminish in a hurry.

Reader Comments

Noz

February 25, 2008 7:55 PM

Once again, the Failing Three have goofed. Apparently long-term thinking and that beyond our borders is not a part of their daily activities. Or, on the rare occasions when the subject comes up, it is all about the anticipated 'take' to offset the massive losses in this market.

Often there are several roads to the same destination. It is in the process of 'getting there' that some of the most critical thinking should take place. In this instance, 'cheap and dirty' is not the recommended approach. Time spent in foreign markets will bear this out. While Americans often spend their money foolishly when it comes to vehicles, this luxury does not exist in many overseas markets, emerging ones leading the list. High quality design and assembly in small, frugal packages wins almost every time. Our habit of building to a price does not cut it.

It is interesting to see what kind of 'savings accrue at the assembly level when desirable features are deleted 'to save on costs'. Just ask Chrysler, then move on to GM and Ford. And hope you get an honest answer rather than the usual BS. I bought one of the first Accords in '76, a time when the Failing Three were bitching about the cost of the coin tray, the schematic on the dash showing doors open, etc. Pennies. Obviously 'the HONDA was being marketed here at a tremendous loss'. Not really. Each and every Accord was the same other than for the two transmissions and one of the three colours. One could opt for one of well in excess of 100,000 Cheevies, of course, and take one's chances of GM getting it right.

Take home message, aim high and EARN high sales. A lost message when it comes to the Failing Three.

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