TRADE-JAPAN: Auto War Forces Japan To Turn To Asia

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Jun 19 1995 (IPS) - Tired of being knocked-around by the United States, the Japanese auto industry is turning its eyes on the newly-affluent markets of East Asia.

The emerging sparkle of Asian markets has been confined largely to Japanese motorcycles and commercial vehicles. But Japan’s Asian neighbours are getting richer, Japanese companies like Toyota, Honda and Mitsubishi need alternative markets to compensate for their overwhelming dependency on the U.S. market.

Despite drops over the last two years, 60 percent of Japanese auto exports are still absorbed by the United States.

“Asian markets have become extremely important to us. Toyota will explore every opportunity offered in Asia to expand sales,” said Keisuke Kirimoto spokesman for Toyota Motor Corporation, Japan’s leading auto company.

On Tuesday, Japan faces the United States in Geneva over one of the most stinging bilateral trade disputes to date.

The newly established World Trade Organisation will be hearing Washington’s accusations against the Japanese market which it says remains closed to American cars and auto parts.

Japan, grappling with Washington’s retaliatory decision to slap 100 percent duties on Japanese luxury car imports, is arguing vehemently against the charge.

“The Japanese auto industry faces a tough situation today. The new focus is on expanding in Asia,” said Minoru Okabe of the Japan Automobile Manufacturers Association (JAMA).

The economic friction stems from the 60 billion dollar trade surplus Japan enjoys against the United States which is threatening to erode close ties between the countries.

Washington’s punishment has been particularly hard to take this time. Japan’s auto companies, which dominated the world, have been hit badly by the rising yen and are struggling to keep afloat.

Overall exports declined 24 percent last year. On the domestic front too, experts say, Japanese auto companies face a no-win situation.

Traffic congestion, the high cost of parking and a lingering economic recession has successfully dipped sales– down 25 percent last year — at home.

JAMA reports that shipments to the U.S. and Europe, its two most profitable markets have been falling consecutively for the first three months of this year.

Exports to Asia, however rose 15 percent in February from a year earlier, with shipments to the Philippines surging 44 percent and Thailand 49 percent from a year earlier.

While a break from the United States is not possible, there is clearly a tendency today to re-examine relations with Asia based on Japan’s expanding economic ties with the rapidly growing region.

Last year Asia accounted for nearly 40 percent of Japan’s trade with the United States accounting for 30 percent and Western Europe 17 percent.

Direct investment into Asia also hit record figures — 47 percent up to 9.7 billion dollars –last year, overtaking Europe for the first time in 11 years.

“JAMA, after years of focusing on the United States, set-up, this year, a special group of analysts to explore the Asian market mainly at the request of Japanese auto manufacturers,” said Okabe.

Japanese auto companies have already established a foot into Asia by setting up manufacturing plants in many of the countries. Mitsubishi Motors Corporation has been assembling the Proton in Malaysia and launched a new join venture, ‘Vina Star Motor Corp’ in Vietnam last year.

Suzuki Auto company manufacturers Maruti in India and also hopes to start operations in Vietnam in spring 1996.

Toyota and Nissan Motor Co, the giants in Japan, have joint ventures in most of the ASEAN countries and Southeast Asia, that produce commercial vehicles plus automobiles.

Asia’s growing consumer market, which once restricted to two- wheelers or small trucks, is changing which is the main attraction for japanese auto companies, says Okabe.

Economic growth has increased the purchasing power of populations in Indonesia, China and India, for example. Beijing officially forecasts total annual demand to reach 6.5 million in 2010, making China the world’s third-largest market after the United States and japan.

No more is Asia a base for manufacturing cheaply for export to the West. The significance of Asia as a consumer market is growing for Japanese companies,” said C.H. Kwan, an analyst at Nomura Research Institute.

Despite the new leanings towards Asia, experts warn of the stiff competition Japanese cars will face in the region against foreign producers that are now enjoying brisk sales due to lower prices thanks to the high yen.

Asia also represents a slightly different market to the United States for Japanese companies. ASEAN governments, for example, follow policies that encourage manufacturing to be done in their countries.

Toyota has been meeting Thai regulations that require the company to raise 70 percent of its procurement of engine parts within Thailand. Import laws in many Asian countries have also forced Toyota’s exports of passenger and commercial vehicles to Asia to remain low-key.

In 1989 Toyota shipped 89,000 passenger and commercial autos to Asia. Last year exports reached 100,000 in the same category.

Auto companies remain optimistic. The different conditions in Asia only makes us more eager to succeed in the region, stressed Kirimoto.