Foreign carmakers cash in as the rich get richer

One Sunday in June, a man in his 30s visited the spacious BMW showroom in Tokyo’s Shinjuku Ward.

Akio Iio, manager of BMW Tokyo Corp.’s Shinjuku dealership, waited on the first-time customer, showing off the gleaming German luxury and performance cars.

To Iio’s surprise, the man not only said he wanted to buy a two-door 650i convertible worth 11 million yen, but promised to pay in cash.

Iio called on the customer, president of an IT company, to collect the money a few days later, and the man paid him in one lump sum.

In recent years, there has been a great deal of talk in the media about the growing gap between rich and poor in Japan. And while the phenomenon, if real, poses headaches for policymakers, manufacturers of luxury cars are turning a handsome profit as the rich get richer.

Auto sales have remained flat at around 6 million units per year since 1998, but expensive imports are grabbing a larger slice of the pie.

According to the Japan Automobile Importers Association, the number of newly registered imports priced at more than 10 million yen nearly tripled from 3,868 in 1998 to 10,937 in 2005.

Cornes & Co., which imports such high-end makes as Maserati, Bentley, Ferrari and Rolls-Royce, illustrates the trend.

In fiscal 2005, Cornes sold 426 British-made Bentleys, up from a mere 43 in 1999. During the same period, it saw its sales of Maserati cars nearly double from 211 to 397.

Kazuhisa Ichinose, director of Cornes’ sales and customer service division, said changing lifestyles over the last five years among its core middle-aged and older customers has given a boost to sales.

“Traditionally, people in those age groups would leave an inheritance to their children,” Ichinose said. “But now, they are more inclined to use it to enjoy the remaining years of their lives.”

“Choi-waru oyaji,” or “stylish old guys,” are more common these days due in part to the popularity of Leon, a monthly fashion magazine aimed at well-off middle-aged men who aren’t afraid to splurge on themselves.

Luxury car importers point out that Toyota Motor Corp.’s introduction of its Lexus models in Japan last August helped expand the market for import makes, too.

Toyota hoped the Lexus, which was already selling well overseas, would lure buyers away from rivals BMW and Mercedes-Benz. Lexus models start at about 3.9 million yen.

But Toyota has had a tough time getting a foothold in the segment, selling 10,300 of the cars by the end of 2005, just over half its sales target of 20,000.

Luxury imports, on the other hand, are enjoying strong sales as potential Lexus buyers check out what the foreign automakers have to offer.

“Customers who were only interested in domestic cars began to consider import cars that are in the same price category as the Lexus,” said Naoto Domeki, spokesman for DaimlerChrysler Japan Co., which makes Mercedes-Benz cars.

BMW Japan Corp. spokeswoman Ryoko Shimizu said BMW’s sales are up 20 percent and the number of people visiting its showrooms have risen by 25 percent since Lexus models went on sale in Japan.

“Potential Lexus customers seem to be visiting our showrooms and some of them have purchased our vehicles,” she said.

Industry watchers say the Lexus debut in Japan is part of a worldwide trend by carmakers to develop premium brands to capitalize on stronger-than-expected demand for luxury cars.

DaimlerChrysler revived the Maybach, a well-known model in the early 20th century that disappeared after World War II, in 2002. The new Maybach can cost 44 million yen or more.

Consolidation among automakers in the late 1990s has also allowed them to devote more capital to developing new high-quality models, according to Tetsuya Kato, editor in chief of Car Graphic, a monthly magazine that often features import and luxury cars.

The decision by Volkswagen AG Chairman Ferdinand Piech to acquire the Bentley and Bugatti makes in 1998 is an example of this trend, Kato said.

People like Mr. Piech, who knew the true value of the companies modernized their models. Potential customers who yearned for the brands but had been dissatisfied with their quality jumped (at the revived makes),” Kato said.