Japanese Open Wallets For Foreign-Made Cars
Imports could grab 10 percent of Japan's market by 2000
A FEW years ago, the sight of a foreign car in Japan would have turned heads. But these days, import sales are booming in the land of the rising yen. Drive along the Ginza, through Shinjuku, or in the Rippongi nightclub district in Tokyo, and you'll see scores of BMWs, Jaguars, even the odd Cadillac.
"In the past, import customers were a small community, but now it's becoming a much broader community," says Shigeharu Mitsubori, managing director of Ford of Yokohama, standing by a huge American flag in the window of one of his five Ford showrooms. "[Showroom] traffic has increased very dramatically" this year, he says, as it has for import dealers across Japan.
In 1985, the Japanese bought only 46,171 foreign-made cars, accounting for a meager 1.7 percent of the total passenger car market. This year, Ford of Japan alone will exceed that total. And by the end of the decade, imports are likely to take at least 10 percent of the Japanese market.
The changing climate was apparent at this month's Tokyo Motor Show. Imports occupied 111,000 square feet of floor space at Makuhari Messe convention center, only slightly under the 122,000 square feet used by Japan's nine domestic carmakers.
Chrysler Corp. used the show to debut its new Jeep Wrangler - the first time one of the Big Three had ever gone to Japan for the worldwide launch of a new product.
"Our goal is to sell 100,000 vehicles a year in Japan by the end of the decade," Chrysler Chairman Robert Eaton declared to a crowd of reporters in Tokyo and others watching a satellite broadcast back in the United States.
Significantly, the Japanese version of the Wrangler will be equipped with right-hand drive. That's no minor development in a country where you drive on the left side of the road and normally have your steering wheel mounted on the right. The Wrangler isn't unique. By the end of 1996, Chrysler will offer five right-hand drive cars.
Ford Motor Company will offer several of its own, including a version of the newly redesigned Taurus. And General Motors Corp. has a handful of its own. But moving the steering wheel is only one reason why imports are gaining a growing share.
Earlier this year, the US and Japan headed off a potential trade war when they signed a new trade bill designed to open up the Japanese new car market. As part of the agreement, Japanese automakers will encourage their dealers to "dual" - to sign up to carry imports. It's the same strategy the Japanese used to successfully penetrate the American market 25 years ago. Rather than set up their own network, companies like Toyota and Honda Motor Company signed up hundreds of existing Big Three dealers.
Dualing is an especially useful approach in Japan, with its astronomical land costs. Japanese motorists prefer shopping close to home, so a manufacturer needs a showroom in virtually every neighborhood. Ford, for example, wants to have 700 outlets in place by the end of the decade, up from 300 today.
But economics are the ultimate key to Japan, says Konen Suzuki, a former Toyota executive who is now president of Ford of Japan. "We have to price against our domestic competition, not against other imports, and that means a huge price reduction."
Price cutting by US Big Three
Ford sliced the price of its Mustang convertible by tens of thousands of yen when it was introduced in Japan last year, a move made less painful by the strong yen. Chrysler cut the price of its Jeep Cherokee model from 3.7 million yen to 3.3 million. And when the Neon subcompact debuts next year, it's expected to cost around 1.5 million yen, compared with 2 million yen for comparable Japanese vehicles.
Obviously, there's a financial advantage every time the Big Three open up a new market. But there are other reasons why they're looking to gain ground in Japan.
"It's an opportunity for all of us to learn from the Japanese," notes G. Richard Wagoner, president of General Motors' North American Automotive Operations.
GM's competitor-cum-collaborator, Toyota Motor Company, has begun selling a right-hand drive version of the Chevrolet Cavalier. The two companies worked for several years to bring the subcompact up to the quality standards that Japanese consumers demand, and Mr. Wagoner says that the lessons GM learned will help improve the quality of the vehicles it sells in the US.
There's yet another advantage, according to Chrysler president Bob Lutz. When the Japanese market was closed to imports, it served as a high-profit base for companies like Toyota, Nissan Motor Company, and Honda.
Now, with the arrival of a new wave of imports, Mr. Lutz says, "we will prevent them from using the home market as an unchallenged, high-profit base to subsidize their aggressive expansion plans in Europe, the US, and the rest of the world."
*Second in a three-part series on the auto industry in Japan. The first part appeared Nov. 9. Next: The new generation of Japanese recreational vehicles.