Quake levels playing field for imported cars

Parts supply problems give foreign brands chance to shine

by and


The record March 11 earthquake had an unexpected side effect for Bayerische Motoren Werke AG dealer Jun Kubota: His showroom in central Tokyo had its best April in at least three years.

Kubota wasn’t alone. Across the country, as Japanese carmakers reeled from output disruptions following the quake, BMW deliveries surged 56 percent in April, while sales of Toyota Motor Corp.’s Lexus brand fell 45 percent. Sales of all imported foreign brands rose 21 percent, even as the overall auto market shrank 47 percent.

“Customers have told me some Lexus models won’t arrive until November,” said Kubota, sales manager at the BMW dealership in Tokyo’s Aoyama district. “So we’re hearing some people say, ‘You know, I’ve always wanted to try a BMW.’ “

The shortage of cars built in Japan will increase the market share of imports, which made up 180,255 units, or just 4 percent, of local car sales last year, said Nicholas Speeks, president of Mercedes-Benz Japan Co. Damage to parts makers from the disaster forced domestic automakers to produce at half of planned levels, causing delivery delays of as long as a year for some models.

“Imported foreign brands are offering sales campaigns, while domestic automakers are advertising less due to lack of inventories” this year, said Takeshi Miyao, an analyst at consulting company Carnorama in Tokyo.

Sales at the Aoyama Square showroom rose about 30 percent in both April and May from a year earlier, helped by buyers of 5-series sedans who originally set out to buy Lexus GS or IS models, Kubota said.

Luxury brands including BMW, Audi and Mercedes-Benz have traditionally dominated Japan’s import car sales, making up about half the market. General Motors Co., Ford Motor Co. and Chrysler Group LLC, the three largest U.S. automakers, sold a combined 7,500 cars in Japan last year, accounting for less than 1 percent of the overall market. Japan’s auto market, the world’s third-largest, totaled 4.96 million units in 2010.

Toyota, which sells a third of all cars in Japan, said last month its new Prius alpha wagon may not reach dealers until next April. Toyota’s plants will run at 90 percent of normal production levels this month, the company said June 1, after operating at 50 percent in April and May. Toyota expects global production to normalize by November or December.

As a result, the wait time for all models is about four months on average, compared with one month prior to the earthquake, said Yasuhiko Sato, general manager of Toyota’s Japan sales planning division.

“We sincerely regret keeping our customers waiting,” Toyota President Akio Toyoda said at the company’s earnings presentation on May 11.

Nissan declined to give delivery times for its models, citing daily fluctuations. The company’s local sales decline is smaller than those of competitors partly because it builds the March compact in Thailand and imports it to Japan.

Honda is concerned customers whose car-inspection certificates are expiring will replace their old cars with imports if they can’t wait for delayed domestic models, Chief Financial Officer Fumihiko Ike said.

“We’re already seeing this happening,” Ike said.

At an Audi dealership in Shibaura in central Tokyo, a Lexus GS owner looking to buy a new car switched to an Audi A5 coupe this month because of the long wait time for the Japanese brand, said Masayoshi Hamura, the manager at the dealership. Three other visitors expressed an interest in switching for the same reason, he said.

The introduction of eight new and revamped models since last September accounts for more of Audi’s recent sales gains than customers switching from domestic brands, Hamura said.

While many luxury cars are too expensive to compete directly with domestic models, Audi’s A3 and A4 are roughly in the same price ranges as Toyota’s Corolla and Mark X, respectively, he said.

“If people start to realize the fun of driving and owning an import car instead of just focusing on gas mileage and price, we’re hopeful this may spur a change in Japanese car-buying trends,” said Hiroshi Okita, president of Audi’s Japan unit.

Toyota’s Prius gasoline-electric hybrid car was Japan’s best-selling model last year, helped by government incentives encouraging purchases of fuel-efficient models.

Japanese car buyers are also biased toward domestic products, which are perceived to be the best, said Gerry Dorizas, head of Volkswagen’s Japan unit.

Other factors also keep imports at a disadvantage, said Ivan Hodac, secretary general of the European Automobile Manufacturers Association. In particular, minicars are favored by Japan’s tax system, he said.

The vehicles, which have engines smaller than 0.66 liter, made up a third of domestic car sales last year. Suzuki Motor Corp.’s WagonR, Japan’s best-selling minicar, starts at ¥1.07 million.

Japan-only specifications for emissions and electronics also burden import brands, causing in one case a delay of nine months for a new model introduction last year, Mercedes-Benz’s Speeks said.

Such barriers make it less attractive for European carmakers to agree to a free-trade agreement being discussed between the European Union and Japan, unless they are lowered, Hodac said.

“This market is extremely difficult to penetrate,” he said.

For BMW dealer Kubota, the aftermath of the earthquake has led to a noticeable increase in showroom traffic.

“It may be inappropriate to say, but this is an opportunity for us,” he said.