Import rise in Japanese cars looms

Nissan shift of March output to Thailand part of cost-saving trend

by Hiroko Nakata

Imports of Japanese-brand cars into Japan are expected to grow beyond the figure for 2010, the highest in a decade, thanks largely to Nissan’s shift of production of the popular March compact to Thailand.

The export frenzy of the 1980s that caused trade friction with the United States is gone because Japanese automakers largely shifted production overseas to be closer to the point of sales. Now the trend is to produce cars overseas to sell in Japan because the made-in-Japan focus has eased.

Experts say domestic automakers will shift more production to other parts of Asia, particularly when it comes to compact cars, because of the intense global cost competition and the yen’s strength against the dollar.

“As competition becomes more fierce, the automakers don’t have to stick to made-in-Japan components that may have high quality but are relatively costly,” said Tadashi Usui, a senior auto industry analyst at Moody’s Japan K.K.

Competition from new rivals, including Hyundai Motor Co., whose cars are composed of parts made in emerging countries, also prompted Japan to follow suit, he said.

The number of imported Japanese-brand cars more than doubled in 2010 to 43,001 units, compared with 17,623 the previous year. The surge pushed the figure for overall imported cars, including foreign brands, to 225,083, up 26.1 percent from a year earlier.

The major cause of the sharp rise is Nissan Motor Co.’s shift to produce the all-new March compact in Thailand instead of at its plant in Oppama, Kanagawa Prefecture, last July. Nissan imported 26,965 March cars from Thailand in 2010.

Before Nissan started to mass-produce the March overseas, only a few thousand Japanese autos, including models of the Suzuki Motor Corp. Splash, Honda Motor Co. Fit Aria and Toyota Motor Corp. Avensis, were manufactured overseas for import to Japan.

Nissan also started to manufacture the March in India and China, and plans to expand to Mexico later this year.

Experts say the auto industry is at a turning point because there is no way for even big-name Japanese makers to survive without cashing in on popular compacts manufactured at minimum cost.

Unlike high-end sedans, producing compacts overseas works to the advantage of automakers because the low-priced small cars appeal not only to domestic consumers but also those in emerging markets.

The improved quality of components produced in emerging countries is supporting the trend, they say.

Compared with electronic gadgets and clothing, it took several years for so-called reimported automobiles to increase because they individually include some 30,000 parts and require safety checks and other hurdles.

“The reimport trend was driven by Nissan’s production of the March in Thailand,” said Takaki Nakanishi, an auto analyst at a Japan unit of U.S.-based global asset management firm Alliance Bernstein LP, adding that Mitsubishi Motors Corp. and Suzuki are likely to follow suit. MMC said it will start selling made-in-Thailand compacts next month and also export them later in the year.

Toyota, which according to recent reports plans to focus more on domestic production than other automakers, has so far not announced any shift of production sites overseas for cars to be sold in Japan.

“If the current rising yen trend continues, the share of reimported cars (out of overall sales) will rise to 5 to 10 percent by 2012, compared with 1.3 percent in 2010,” Nakanishi said.

Toshiyuki Shiga, Nissan’s chief operating officer, hasn’t ruled out that his company may shift more compact production overseas if the yen keeps rising. “I can’t deny that possibility,” he told reporters last month.

But Shiga pledged that Nissan will continue to produce at least 1 million units at home to protect and improve the heritage of the country’s manufacturing prowess.

“If we don’t do that, the production would flow overseas,” he said.