The end of Japanese import quotas this year isn't quite the non-event that some believe. It may even signal a turning point in Europe.
Consider the case of Toyota. It has 80,000 orders for the Yaris in Europe and is worried that import constraints will not allow it to meet demand in southern European markets like Italy.
The 1999 quotas were based on the assumption that the European market would drop 2 percent. Sales in the 15-member EU have instead increased by 8 percent. The quota levels won't be adjusted again until autumn and that's too late to make an impact in the more restricted countries.
Italy, France, Spain, Portugal and the UK have specific quotas for each Japanese make. 'The Yaris has been a really hot seller in Italy,' said a Toyota Europe spokesman. 'If we pass our limit we can't move more product until the ceiling is gone.'
In the UK, the limitations have fueled a gray market in some Japanese cars. When the quota restrictions are lifted, new opportunities will be created for smaller Japanese makers like Subaru.
The end of quotas gives the Japanese confidence to strengthen their distribution networks and to add capacity. Honda has broken ground for a new production facility in Swindon, England, with capacity for another 100,000 cars. Honda now aims to double its market share in Europe. Construction at Toyota's Valenciennes plant is underway. It wants 5 percent of European sales by 2005, up from 3 percent today.
With the Japanese unshackled, the European market won't be for the faint-hearted. That's why rumors that Fiat Auto and Ford of Europe are talking about merging sound so plausible.
But the confidence that Toyota and Honda display in Europe is a healthy sign. A more open market is part of a recalibration of the European industry, alongside the euro, price convergence, and a likely end to the block exemption distribution laws.
The combination of changes could set off the kind of market run-up seen on the other side of the Atlantic in the past decade. In North America, the market is open, the Japanese keep adding capacity, the currency is common and there is a retail revolution going on. Take heart, Europe.