Maserati, VW lead foreign automakers making inroads in Japan
TOKYO (Bloomberg) -- Maserati, Volkswagen Group and other foreign automakers are having their best sales streak in years in Japan, as the economy improves and consumers like Taichi Matsukura try to stand out amid a sea of Toyotas.
"When I opened the door, the colors and interior immediately evoked Italy. The sound of the muffler got my heart racing," Matsukura, a 42-year-old restaurant designer, said about the Fiat Abarth 595C convertible he bought to replace his Honda CR-V. "I don’t play pachinko or golf. So at least I deserve a car to excite myself."
Consumers flush from a 57 percent rally in the Nikkei in 2013 -- Japan's steepest rise in four decades -- have been spending on imported sports cars and compacts. In the year that ended March 31, 302,000 non-Japanese cars were sold in the country, the most since 1997, according to the Japan Automobile Importers Association.
Foreign automakers have long struggled to make inroads to Japan, which Ford Motor Co. CEO Alan Mulally last June called the “most closed market in the world.” Even now, domestic models account for 90 percent of sales volume. Two of every model sold are domestic “kei” cars -- small, boxy and easy-to-handle models seen in Tokyo and rural areas alike.
Foreign carmakers captured 9 percent of non-kei car sales in the year ending in March, their highest share since the importer group started keeping records in 1989.
“I thought Japan was over after the Lehman crisis -- expensive things didn’t sell and many foreign makers thought it wasn’t worth investing there,” Kintaro Ueno, head of the importers association, said in an interview. “Last year presented the perfect chance to revisit Japan’s importance.”
Among the beneficiaries was Mercedes-Benz, which sold a record 59,774 vehicles in Japan in the year through March, up 40 percent over a year earlier and overtaking Toyota’s Lexus to regain the position of best-selling premium brand in the country after four years.
Fiat Chrysler Automobiles’ unit Maserati, whose Gran Turismo starts from 22 million yen ($217,000), more than doubled deliveries in Japan to 714 vehicles in the year ended March, the biggest gain among luxury brands.
The question is whether foreign carmakers’ advances are sustainable. Japan’s consumers snatched up increasing numbers of cars, both foreign and domestic, in the seven months through March -- just ahead of Japan’s move, in April, to raise its consumption tax to 8 percent from 5 percent. The government cushioned the effect of the increase by cutting its vehicle-purchase tax to 3 percent from 5 percent.
In the first month of the higher tax, deliveries of imports were down 24 percent compared with the previous year -- compared with a 6 percent drop in overall auto sales. The last time the tax was raised, in April 1997, car sales dropped 15 percent over the previous year and declined for 21 months in a row.
Even so, Takeshi Miyao, a Tokyo-based auto analyst at Carnorama Japan, expects foreign carmakers to extend their gains in the coming year, thanks to a range of new imported models as well as expected improvements in the economy.
Bank of Japan Governor Haruhiko Kuroda doubled monthly bond purchases in April last year to help the country exit about 15 years of deflation. As the yen has weakened and made Japan’s exports more competitive, the stock market surged. The Nikkei has pared back some gains, falling 13 percent this year, but the economy could see further benefits as companies raise wages and Prime Minister Shinzo Abe encourages more women to join the workforce.
“When the economy improves, people tend to be more willing to spend on more expensive things,” Miyao said. “Import car sales generally expand more in good economic cycles and shrink faster when economy goes down.
Though March, foreign cars accounted for some of the biggest advances in Japan’s market, slicing into Japanese makers’ share. Toyota Motor Corp.’s market share for non-kei cars dropped to 46 percent last year from 48 percent four years ago. Nissan Motor Co.’s share dropped to 13 percent from 16 percent in the same period, according to Japan Automobile Dealers Association.
Seven of the 10 best-selling non-kei cars in the past 12 months were compacts, including Toyota’s Aqua and Honda Motor Co.’s Fit, according to IHS Automotive. No foreign models made the top 10 rankings.
Volkswagen Group’s new Golf compact came the closest, ranking 27th with about 31,000 sold. Last year the Golf became the first foreign model named Japan’s Car of the Year, awarded by the nation’s automotive press. VW’s deliveries including the Polo, Beetle and the Up minicar -- rose 25 percent through March, to about 72,000 units, helping it stay the best-selling foreign maker for a 14th straight year.
“More and more kei owners are coming to our dealers, a phenomenon we have never seen before,” said Shigeru Shoji, President and CEO of Volkswagen’s Japan unit. Many are buying the Up -- the smallest and cheapest VW in Japan -- as their first imported car, he said.
“Until very recently, imported cars have been big, muscular and pricey,” said Ueno, who also heads Mercedes’s Japan unit. “The global downsizing trend enabled foreign carmakers to introduce models more suited to Japan.”
Foreign automakers brought a total of 14 compact models to Japan in 2013, the most in a year since 2005, according to IHS.
Ford brought its Focus to the market last year for the first time since 2007. The automaker started selling the smaller Fiesta in February and plans to introduce its EcoSport compact SUV this month.
Premium brands including BMW, Audi, and Mercedes-Benz are also introducing lower-priced compact models in Japan. Mercedes-Benz introduced its compact A-class model in January 2013 and sold 14,600 of them over the next 12 months, accounting for nearly one-quarter of its country sales, according to data from the association.
Volvo Cars too introduced the new V40 compact in February 2013. The smallest car in its lineup also became its best-selling car in Japan, with 10,300 units sold in the last fiscal year.
Foreign carmakers have complained that Japan’s cumbersome certification process for imported cars, which the U.S. and Japan have agreed to review, have amounted to an invisible trade barrier. The market share of foreign-branded cars dropped to 5.2 percent in 2009, the lowest level since 1995, after the financial crisis suppressed demand, according to data from the importers association. Foreign makers’ share cracked the 7 percent level for the first time in 2011.
Foreign makers’ market share may expand through around 2016 as they introduce new models, IHS analyst Yoshiaki Kawano predicted. Japanese brands, meanwhile, may introduce more competing models such as a potential entry-level car from Lexus, he added.Contact Automotive News