Foreigners face uphill battle to sell cars in the tough Japanese market

  • Business
  • Wednesday, 19 Feb 2003

TOKYO: On the surface, the Ja-panese seem to love anything foreign: they buy the most Louis Vuitton bags in the world, watch the most Hollywood movies outside the US and sprinkle their ads with English slogans. 

But cars have always been an anomaly. In a country where 16 out of 17 cars are Japanese, foreign makers are facing an uphill battle to hold onto a miniscule market share that hasn’t grown in over six years. 

Even as makers announce new partnerships to increase sales, as BMW did last week with Japan’s Yanase & Co, industry executives concede it will be difficult to raise their 6% slice of the domestic pie. 

“Japan is a unique market,” Volkswagen Japan president Tsu-tomu Umeno said. “Local brands are extremely competitive, especially since Japan has strict fuel-efficiency rules. Besides, there's no autobahn on which to enjoy driving powerful European cars.” 

The market share held by foreign carmakers has not grown since sales peaked in 1996 – and that was only after the Japanese government intervened with deregulation and the yen’s sharp rise made imports cheaper. 

Domestic rivals also enjoy a web of distribution networks and a reputation for building low-priced, top-quality cars, all of which has made life that much more difficult for foreign brands in Japan. 

And with the economy falling on hard times, business is getting even tougher. 

Although foreign brands command a third of the market for full-sized passenger cars, that segment is shrinking fast as consumers drive off with cheaper and smaller cars. 

With the odds stacked against them, foreign makers are now shifting gears to get back in the race. 

In the past few months they have signed deals to open new showrooms, announced plans to diversify their product lines and began offering flexible payment options to entice young buyers. 

For BMW the solution is to improve its sales technique. 

Last week, the German carmaker said it would put Yanase, Japan’s oldest distributor of imported cars, in charge of eight sales outlets in Tokyo, with more to come later. 

“We’re good at making cars but we're by no means the best at retailing,” BMW Japan president Ludwig Willisch said. 

That deal comes just two months after a similar pact between Yanase and Audi, a unit of Volkswagen AG. 

Audi, which two years ago had only five exclusive showrooms, boosted the number of dealerships to 76 last year through its deal with Yanase, helping sales grow by 44% in 2002. 

Volkswagen, Japan's top foreign seller with a 23% share of the imported car market ill also open several new dealerships this year as it targets a 3% rise in sales to 62,000 units. 

Jaguar, the luxury arm of Ford Motor Co, will add at least 10 showrooms in 2003 to bring the total to over 100, while renovating three-quarters of existing dealerships. 

Another issue is pricing, which foreign carmakers are reluctant to lower because they sell so few cars. 

Just as rapidly, foreign brands are rolling out new cars to fill their showrooms, and many plan to use this autumn's Tokyo Motor Show to stir interest in fresh offerings. 

In January alone, DaimlerChrysler introduced the CLK55 AMG luxury coupe, an addition to its Mercedes-Benz line, General Motors unveiled its Saab 9-3 sports sedan, and Audi introduced the RS6 sedan and TT Roadster 1.8T. Audi is also planning at least three more models this year. 

Still some say the biggest hurdle for Japanese buyers is psychological. Many Japanese, for instance, associate a big Mercedes sedan with gangsters. – Reuters 

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