Japanese Automakers Increase Japan Production While Market Declines

Anthony Fontanelle
July 13, 2007

The rise of Japanese automakers among the ranks of automobile manufacturers has been well documented. While the reliability of their vehicles is considered superior to the reliability of American vehicles in the past, another reason for these automakers’ success is the value of yen - the currency of Japan.

With a weak yen value, Japanese car manufacturers are able to take advantage of the huge profits that they would get if they export their vehicles into the United States. By exporting their vehicles in the country, they can offer it with a much lower price tag than vehicles made in the United States. The result, of course, is that consumers will obviously pick a Japanese-made vehicle known to be reliable and is priced lower than its American competition.

Currently, American car companies are crying foul for Japan’s tactics over auto marketing in the United States. The reason is that even if the Japanese auto market is constantly declining, Japanese automakers are still expanding their production in their home country and then exporting them to the United States where they are guaranteed to turn bigger profit.

“The huge misalignment of Japan yen – is giving Japanese auto manufacturers an unfair and undeserved trade advantage over U.S. companies,” said Stephen J. Collins, the President of the Automotive Trade Policy Council or ATPC. The Council’s members include Daimler Chrysler, Ford and General Motors. These three companies have witnessed declining market shares as Japanese automakers continue their upward surge.

“These latest figures should refute claims that the major surge of Japanese auto exports to the U.S. is being driven by market forces. It’s clear that the primary beneficiary of Japan’s 25-30% undervalued yen is the Japanese auto industry, which is reaping a $4,000 to $10,000 yen subsidy for every vehicle it ships to the U.S,” added Collins.

During the first half of the year, the number of vehicles exported to the country from Japan increased by 13.7 percent over last year for the same period. That increase pertains to 135,498 autos exported to the country more than the figures last year. On the other hand, the number of vehicles made in the United States by Japanese automakers for the first half of the year only increased by 2 percent.

In Japan, the demand for automobiles has declined reaching the lowest level after 30 years. During the first half of the year, new cars sales in Japan dropped by ten percent. This means that Japanese automakers are aiming for bigger profit by manufacturing their vehicles in Japan and exporting them to the United States. One of the many Japanese models built in Japan and shipped to the United States is the Toyota Prius. The weak yen combined with the high demand for the hybrid car means that Toyota is raking in a lot of money by building the Prius in Japan.

This trend does not only apply to assembled vehicles. Auto parts made in Japan are also exported to the United States thus creating more profit for Japanese companies. Even Subaru floor mats made in Japan when expected to the United States would turn a bigger profit than manufacturing such components in the United States.

“With today’s artificially weak yen, Japanese automakers are boosting plant capacity back home even as domestic auto sales in Japan continue to bottom out. But patience in the U.S. with Japan’s mercantilist approach to solving its economic problems is wearing thin. With numerous bills addressing the need to respond and remedy the damages caused by unfair currency misalignments now introduced in the U.S. Congress, the message is clear that action is coming,” concluded Collins.

Source:  Amazines.com