Japanese carmakers are under increasing pressure from the weak euro, and the cost of importing cars into the euro zone.
The Japanese yen has soared by about 30 percent against the euro in the past 12 months.
'The current rate of 90-92 yen to the euro really affects our sales performance in Europe,' said Hans Tolenaar, vice president of Mitsubishi Motor Sales Europe.
Except for Toyota and Nissan, the sales of every Japanese carmaker has declined in Europe this year. Mazda, Daihatsu and Subaru have been particularly hard hit because they do not have any large-scale European production.
Suzuki has plants in Hungary and Spain, and imports cars from India. 'If they're building vehicles and importing them into a continuously weak euro zone, they lose money on every vehicle they build,' said Nigel Griffiths, production analyst for Standard & Poor's DRI in London. 'At the same time, if they build greenfield assembly plants in Europe, the initial investment at the moment would be relatively cheap.'
The situation is complicated by the strength of the Japanese manufacturing base in the UK. Toyota, Honda and Nissan build cars in the UK.
'You can say that we bear a double burden, because of the high rate of the yen and subsequently the expensive pound sterling,' said Takeshi Sumita, manager of public and investor relations for Honda Motor Europe, 'The UK in 1990 was still a low-cost country.'
Honda wants to offset these high costs with improved manufacturing processes and a more clearly defined model range. 'Then we can export from Europe to other places, including our future three-door Civic which we will ship from the UK to Japan,' Sumita said. But according to Minoru Harada, president of Honda Motor Europe, the yen has affected sales: 'We will have lost 10 percent of our original targeted sales volume this year.'
Honda expects to sell 230,000 cars this year and 250,000 in 2001. Honda has set a medium-term goal of 300,000 units. Mitsubishi also had to adjust its targets. The original plan was to sell 240,000 cars and 90,000 light-commercial vehicles.
'Last November, we felt the threat of an increasing value of the yen so we adjusted our volume for this year to 205,000 cars and 80,000 light-commercial vehicles,' said Mitsubishi's Tolenaar. 'We expect this volume to consolidate for next year as well.'
Mitsubishi plans to build its new compact model, the Z-car, at NedCar in the Netherlands after 2004 as part of its new ties with DaimlerChrysler, said Tolen
Though Toyota is slightly ahead this year, it is still worried.
'Without the success of Yaris, we might not have been able to meet our target of 600,000 sales,' said Tadashi Arashima, senior vice president sales and marketing of Toyota Motor Europe. 'But now it turns out to be 650,000 this year, and next year we should achieve a similar volume. After 2002, with Yaris production in France at full swing, we will see more growth again. Eight hundred thousand is still our goal for 2005.'