Peeling Rubber in Japan : Sales of U.S. Cars Accelerate Because of Weaker Dollar
When Toshiaki Yamamoto and his wife dropped by their neighborhood Ford dealer after a recent Sunday morning of golf, they were impressed with what they saw.
“Before, I wasn’t interested in American cars because they obviously were not fitted to Japanese road conditions,” Yamamoto said. “They were too big for Japanese narrow streets, and the steering wheel was on the other side. . . . What I’m seeing is the (steering wheel) is now on the right side of the car, and what I’m especially interested in is their pricing and their safety features.”
Ford, Chrysler and General Motors have been gearing up for two or three years to challenge the Japanese auto makers on their own turf. Now, as the dollar hits post-World War II record lows against the yen, imports are increasingly price-competitive in Japan and those efforts are beginning to pay off. While still a small percentage of the total market here, U.S. car sales this year are booming and seem headed for continued rapid growth.
The Big Three of Detroit expect to sell about 37,000 U.S.-made vehicles here this year, almost double the 19,630 sold last year. That represents about 0.6% of the Japanese market, but the American presence is somewhat greater than the figures indicate because of sales of other cars American auto makers build here and in Europe.
Overall, imports of passenger cars, including those made by Japanese firms in the United States and elsewhere, are up 30% this year. In May, imports accounted for a record 8.6% of the market.
The dollar’s fall was a bit of luck for the U.S. makers. They have been able to take advantage of it because of long-overdue design changes, the development of dealer networks here and, at least for Ford, more successful advertising.
Shuko Mizuno, a 29-year-old Tokyo jewelry store employee, last week bought a Chrysler Jeep Cherokee Limited. She said she intended to buy a smaller, moderately priced Japanese car, but the Cherokee was a bargain this year at the equivalent of $37,755. Two years ago, a Jeep Cherokee cost $42,400 at the exchange rate then.
“The price has come way down on the Cherokee, and I heard it’s very sturdy,” Mizuno said. “It has power, too. If it’s in an accident, it seems it would be relatively safe.”
Mizuno said she was also attracted to the Cherokee because it is kakko ii --which translates roughly as “neat” or “cool”--and because it will be good for going to the mountains with friends for fly fishing.
“Compared to the past, people are using cars for leisure more,” she said. “Outdoor activities are fashionable now, and people are taking more vacations.”
Said Konen Suzuki, president of Ford Japan: “Japanese consumers are not always looking for the same car they have been using for many years. They are looking for new things.”
Of America’s Big Three, Ford is the one expanding most rapidly here. It aims to sell about 60,000 Ford brand cars here this year, including 12,600 imported from the United States. (Ford also manufactures some of the models it sells here in Mazda factories.) It plans to boost its sales in Japan to 200,000 units--half will be imports--by the end of the decade.
General Motors President John F. Smith Jr. said here Friday that his firm aims to sell 100,000 cars annually in Japan by 2000.
“We are very serious in Japan,” he said.
Although simplified customs procedures have lessened the once-daunting regulatory obstacles that had inhibited U.S. car sales, U.S. manufacturers still face great difficulties in Japan.
Most Japanese dealers maintain strong relationships with a single Japanese manufacturer, so it is still difficult to get American cars into many showrooms across Japan. This too is starting to change, but slowly. The sky-high price of real estate makes it difficult for American companies to build their own dealership networks.
Ford has marketed its cars here for more than 20 years through the distributor Autorama Inc., which has 288 dealerships and is jointly owned by Ford and Mazda. Ford also holds a 24.5% stake in Mazda. In May, as part of an effort to raise Ford’s profile, the “Autorama” signs came down at these showrooms and new “Ford” signs went up.
That makes Ford the first U.S. firm to sell cars here through a dealer network bearing its own name. General Motors cars are sold at 200 outlets of the Yanase chain; Chrysler vehicles are sold by Seibu Motor Sales Co. and through Honda.
Ford achieved what was seen in the industry as a modest but important breakthrough in May, when Tokyo Nissan Auto Sales Co. converted one of its 53 outlets to serve as a Ford dealership under the name Ford Tohnichi.
Chrysler’s connection with Honda is a complex manufacturer-to-manufacturer relationship. The Ford hookup with Tokyo Nissan, by contrast, set an important precedent as the first time a U.S. manufacturer has made a sales contract with a dealer that has some independence but is also part of a Japanese keiretsu chain of related firms. Nissan Motor Co. owns 25% of Tokyo Nissan.
Deals such as the Ford-Tokyo Nissan one are critical if U.S. car sales are to really take off here.
Finding ways to encourage other Japanese dealers to take similar steps is a goal of American negotiators in the U.S.-Japan trade talks.
Tokyo Nissan’s decision to devote an outlet to selling Fords was triggered by Japanese automobile executives’ desire to do something to ease the trade tensions, said Toshio Nakano, president of Ford Tohnichi. But the deal would not have been made unless his firm thought it could make money, he added.
“Ford Japan’s President Suzuki said Ford will supply cars at reasonable prices, and they will put the (steering wheel) on the right-hand side, and they will emphasize service and availability of parts,” Nakano said.
“The market in Japan is close to saturation, and now customers are not only looking for Nissans or Toyotas. The type of customers who want to enjoy car life is increasing. So we figured that if Ford makes enough effort, we can make a business out of it. That’s why we decided to open this company.”
The American offensive began early last year, when Chrysler began building a right-side-drive Jeep Cherokee for Japan and cut its price. Chrysler sales here spurted to 5,698 last year from 1,602 vehicles in 1992, and sales this year are running at more than triple the pace of the first half of 1993.
Last month, a second U.S.-made right-side-drive model was introduced here, the Ford Probe. At the same time, Ford began shipping to Japan its European-made right-hand-drive Mondeo. Festiva and Laser models made at Mazda factories in Japan were added to the Ford lineup.
General Motors sells right-side-drive cars here from its European Opel subsidiary.
GM cut Opel prices 10% just last week in response to the latest currency fluctuations.
“The strengthening of the yen against the dollar has done more to level the trade playing field between Japanese and U.S. companies than all of the rhetoric and policy initiatives of the previous 20 years,” GM’s Smith said.
All of the Big Three have announced plans to start U.S. production of other right-side-drive vehicles for the Japanese market over the next year or two.
If U.S. manufacturers can deliver a wider variety of right-side-drive vehicles at competitive prices, American cars have some advantages that should help boost sales. Design differences give them a distinctive look, and air bags are more widely available in U.S. vehicles.
“I think, in general, Japanese cars are a little behind in safety feature installation,” Yamamoto said. “That is a very regrettable thing.”
The Ford Mondeo’s ceiling light, located next to the rear-view mirror, caught the eye of Yamamoto’s wife, Nobuko. She had never seen a Japanese car designed that way, she said.
“I’d like it,” she explained, “for when I put on cosmetics.”
American cars are beginning to regain a good reputation, said Yamamoto, who was leaning strongly toward buying a Ford Mondeo wagon priced at the equivalent of $27,550.
“Japanese consumers don’t have prejudice,” he said. “If something is inexpensive and good, they will buy.”
U.S. Car Sales in Japan
After years of effort, U.S. auto makers appear to have gained a foothold in Japan and are enjoying a growth spurt this year, primarily because of the falling value of the dollar.
Cars sold in 1994*:
General Motors: 9,000
Ford: 12,600
Chrysler: 14,000
* Projections from auto makers.
Source: Japan Automobile Importers Assn.
