Nation's Preference for Ultrasmall Autos Poses Hurdle for Foreign Auto Makers: Minicars such as Honda's N Box were 34% of Japan's passenger cars
Japan's auto market, once a global trend setter, has become one of the most disconnected from markets elsewhere, putting it at risk of becoming irrelevant, say executives here.
More than 90% of cars sold in Japan are Japanese brands. A third of them—ultralight minicars—are sold nowhere else. Originally developed to fill Japan's need for cheap cars after World War II, they are too small or too expensive for other markets.
The country's singularly strong appetite for fuel-efficient cars means car makers have developed a series of advanced technologies, such as hybrid cars, that don't necessary translate easily elsewhere.
Japan has no tariffs on auto imports. Japanese auto executives say the country's unique tastes are a big reason for global auto makers' failure to thrive in the world's third largest auto-buying country, after China and the U.S. Foreign auto executives say the country's preferential tax treatment for minicars and its unique safety and environmental regulations are nontariff barriers that protect the country from foreign competition.
For the third straight year, the Detroit Three auto makers skipped the Tokyo Motor Show; General Motors Co. head in Japan said showing up made little economic sense when weighed against GM's sales here.
In some ways, the auto industry's love of minicars here is reminiscent of Japanese smartphone makers, which geared features heavily toward Japanese consumers and struggled to make headway overseas. Their shortcomings led to the coining of the term "Galápagos" to describe the market, like the group of islands cataloged by Charles Darwin : uniquely evolved and ultimately at a disadvantage because of its isolation
Japanese auto makers such as Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. sell plenty of cars around the world and have mastered global design and tastes with well-regarded luxury cars, sport-utility vehicles and pickup trucks. Nevertheless, some executives here worry that catering too strongly to demand at home leaves them at risk of being unable to switch gears quickly—especially as many global auto makers introduce new models in as many countries as possible to develop economies of scale.
"The Japanese market is Galápagos," said Shigeru Shoji, chief executive of Volkswagen Group Japan KK, on the sidelines of the Tokyo Motor Show. "You can test things in Japan. But even if it turns out to be an attractive product in Japan, it would be hard to make it a universal and global product," he said. That can hurt Japanese car makers, which have been slow to offer large luxury vehicles in China and diesel engines cars in Europe.
Others say the specialization makes it tough for outsiders, who must adapt their cars to sell here. "Japan is a unique market," said Sumito Ishii, managing director of General Motors Japan. "For those operating globally, that could present a barrier."
Some Japanese car makers say the focus on mini and hybrid vehicles helps them cultivate and improve future technologies for future growth markets...
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