Japan's auto makers focus on key
markets By Hisane Masaki
TOKYO - Powered by brisk sales in the
United States, Japanese auto makers are now racing
to make forays into other parts of the globe,
especially four rising economic powerhouses
collectively called the BRIC countries - Brazil,
Russia, India and China.
Though the US
remains by far the world's biggest and most
important auto market, Toyota, Honda, Nissan and
other Japanese auto giants see the BRIC countries
as crucial to their long-term plans for the global
marketplace given the four countries' huge growth
potential.
For example, Toyota Motor
Corp's first Russian assembly plant will open next
year, and Nissan Motor plans to begin construction
of its first plant there this year. Toyota plans
to develop vehicles
specifically targeting
emerging markets, the first of which will be sold
in India around 2010. In collaboration with its
subsidiary, Daihatsu Motor, Toyota will also put a
new plant in India on stream next year. Suzuki
Motor plans to put its second Indian plant in
operation by the end of this year. Nissan is
likely to join its Japanese rivals in producing
vehicles in India in the near future. In
China, Toyota recently began to roll out its first
made-in-China Camry. Honda Motor's new plant in
China will go on stream late this year. Nissan,
for its part, plans to develop low-priced cars
specifically targeting the BRIC markets.
A global investment spree Buoyed
by steady sales in overseas markets, Japanese auto
makers generally posted stellar performance for
fiscal 2005, which ended on March 31. Toyota's
profit for the fiscal year totaled 1.37 trillion
yen (US$12.3 billion), up 17% from 1.17 trillion
yen the previous year, the fourth straight year of
record income for booming Toyota. Sales for the
year surged 13% to 21 trillion yen from 18.6
trillion yen the previous year. Among other auto
makers, Honda, Mazda Motor and Suzuki scored
all-time highs in recurring profits.
Japanese auto makers are rushing to expand
production abroad amid sluggish sales at home and
on the back of profits they earn abroad,
especially in their cash-cow market - the US.
Three of Japan's five major auto makers posted
record-high overseas outputs in fiscal 2005,
backed by continuing moves to relocate production
overseas. Toyota boosted overseas output 19.3% to
3,731,253 units during fiscal 2005, while Nissan
posted a 12.1% rise to 2,073,472, and Honda a
10.7% rise to 2,199,501.
Japan's seven
major auto makers plan capital spending totaling
more than 3 trillion yen (nearly $30 billion)
globally for the first time for the current fiscal
year that started in April. All but one of the
seven auto makers plan to raise their capital
expenditures. Mitsubishi Motors alone plans to cut
its capital spending by 11% as it struggles with
excess capacity in North America and Australia.
Toyota plans to make capital expenditures totaling
a little over 1.5 trillion yen, including those
made by its subsidiaries, for the current fiscal
year, up 20 billion yen from last fiscal year.
Honda plans to increase its capital spending by
25% to 570 billion yen and Nissan also plans to
boost its capital expenditures by 16% to 550
billion yen.
The Japanese automobile
industry association announced recently that the
number of vehicles produced abroad by Japanese
auto makers, including truck makers, rose 8.2% in
2005 to 10.6 million units. It was the first time
that the number had exceeded the 10 million mark.
Another milestone is expected this year, when
overseas production by Japanese auto makers
surpasses their domestic production, which totaled
10.8 million units in 2005.
Toyota plans
to boost its group global production to a record
high of 9.06 million vehicles this year, putting
it on a solid course to overtake General Motors of
the US as the world's largest auto maker in terms
of production volume this year. Toyota recently
set an annual global sales target of a little over
10 million units in 2010, excluding vehicles made
by its subsidiaries, Daihatsu and Hino Motors Ltd.
This figure will be about 3 million more than it
sells globally at present. Toyota seeks a doubling
of sales in Asia and a 35% increase in sales in
North America. More than 90% of the targeted
increase of 3 million vehicles should come from
sales in foreign markets.
Honda also
expects global annual sales of 4.5 million units
or more in 2010. Nissan is targeting global annual
sales of 4.2 million units in fiscal 2008.
New frontier Though North
America remains a cash cow, Japanese auto makers
are set to spend more on new facilities in the
BRIC countries, which they see as a new frontier
that has still to be fully tapped, for the current
fiscal year and beyond.
The BRIC countries
began to draw particular attention after Goldman
Sachs painted a rosy picture of the four economies
in a report titled "Dreaming with BRICs: The Path
to 2050" in October 2003. The report forecast that
Brazil, Russia, India and China would become four
of the world's six largest economies in terms of
gross domestic product (GDP) by the middle of this
century - China, the US, India, Japan, Brazil and
Russia in this order.
The report also
predicted that the combined GDP of the BRIC
economies would surpass that of the US, Japan,
Germany, Britain, France and Italy by 2039. China
and India, the world's two most populous
countries, have enjoyed high-flying economies.
According to the latest Asian Development Bank
forecast, China's GDP will grow 9.5% this year,
while India's will grow 7.6%.
A huge
population is becoming wealthy enough to afford
cars in the two Asian countries. Russia and Brazil
are also becoming key players in the world economy
in terms of natural resources under their control.
With China's sizzling economy and swelling middle
class, the country's auto market grew 30% last
year to 5.7 million vehicle sales, according to
local-industry figures, just behind Japan's 5.8
million. China is expected to replace Japan as the
world's second-biggest auto market this year after
the US.
India is also emerging as a major
auto market. It is already Asia's third-largest
auto market, after Japan and China, and the
world's 11th-largest. According to the Indian
automobile industry association, auto sales in the
country rose 8.2% in fiscal 2005, totaling nearly
1.5 million units.
China In
China, Toyota, where GM is thriving, recently
began to roll out its first made-in-China Camry,
the firm's best-selling model in the US. Toyota
has so far been behind GM and other makers in the
world's fastest-growing market.
The launch
of the mid-sized Camry, built in a new factory in
Nansha, near the southern city of Guangzhou,
underscores the Japanese auto maker's newfound
emphasis on the Chinese market. By shifting
production to China, where consumers are closer,
Toyota hopes to double its annual Camry sales in
the local market to 60,000 this year. Guangzhou
Toyota Motor Co, Toyota's joint venture with a
local firm, also plans to build its second
assembly plant near its existing plant, which will
go on line in early 2009. The first plant has an
annual capacity of about 100,000 units. The second
plant is also expected to have a similar capacity.
Toyota aims to sell as many as 1 million
vehicles in China in 2010, or a projected 10% of
the rapidly growing market. This would be a sharp
increase from the 180,000 units, a paltry 3% share
of overall auto sales, the company sold there in
2005. GM captured 11% of the local market last
year by selling about 665,000 units, followed by
Volkswagen AG. Until recently, Toyota cars were
viewed by local consumers as pricey imports. But
the company's reputation for reliable,
fuel-efficient cars is increasingly appealing to
economy-conscious Chinese drivers. In the first
quarter of this year, Toyota was ranked sixth in
sales in China, with 56,231 units. Last year, the
company came in 10th place, according to industry
figures.
In collaboration with its local
partner, FAW Group, Toyota already plans to begin
producing 200,000 Corolla cars a year at its third
joint-venture plant, in Tianjin, in 2007. To
attain its sales target, Toyota now intends to
have the new Tianjin plant manufacture more
Corolla cars.
Toyota began production of
its Prius hybrids in China in December - marking
the first time that Toyota had produced hybrids
abroad. Toyota plans to begin full-scale
production of fuel-efficient cars in China. It
plans to start producing Yaris models, known as
Vitz in Japan, in Guangzhou and RAV4 sport-utility
vehicles in Tianjin in 2008. A total of 130,000
units of the two models will be churned out
annually.
Honda's second plant in
Guangzhou will also go on stream late this year.
Mitsubishi set up a research and development
center in Shanghai, its third such center outside
Japan. The R&D center began operations
recently.
India In India, Toyota
will build a new plant to produce small cars as
early as next year in collaboration with its
subsidiary Daihatsu. The pair will build the new
plant near an existing factory run by a joint
venture between Toyota and an Indian company in
Bangalore, southern India. Initial production will
be 100,000 cars a year, with investment likely to
total more than 10 billion yen.
The move
is aimed at expanding Toyota's global strategy
beyond North America and Europe to emerging
markets that also include Brazil, China and
Russia. Toyota also aims to catch up with smaller
rival Suzuki in India's fast-growing automobile
market by expanding its lineup of small cars.
Toyota has a market share of only 5% in India,
while India's biggest car manufacturer,
Suzuki-controlled Maruti Udyog, holds about 50% in
the local market, where small cars account for
more than 70% of overall auto sales. Toyota sold
48,000 vehicles last year, the company's record
for the country.
Toyota's ambitious
expansion of local production is inevitably
bringing forth the new task of securing a
sufficient number of skilled workers, among other
prerequisites, for sustainable growth. In India,
Toyota will open a vocational training school
within the compound of Toyota Kirloskar Motor, a
joint venture between Toyota and the Kirloskar
Group, in Bangalore in August next year to foster
local engineers. It will be the first such school
outside Japan to be run by Toyota.
Suzuki's second four-wheel-vehicle
manufacturing plant in India will go on stream by
the end of this year in the northern state of
Haryana in a suburb of the Delhi metropolitan
area. Honda also intends to boost its annual local
production capacity from 30,000 vehicles to 50,000
by year-end.
Nissan is likely to join its
Japanese rivals in producing vehicles in India
some time in the not-too-distant future. "We will
make a move in India," Nissan chief executive
Carlos Ghosn said recently.
Russia In Russia, where about
1.5 million new autos are sold annually, Toyota
began the construction of an assembly plant in St
Petersburg last June. The plant, the first in
Russia for Toyota, will be operated by Toyota
Motor Manufacturing Russia, a subsidiary
established in May last year. The plant, which is
scheduled to be operational in December 2007, will
mainly manufacture Camry vehicles and have an
annual production capacity of 50,000 units. Toyota
will initially invest 15 billion yen in plant and
equipment.
Nissan will join Toyota in
Russia production - the company announced recently
that it will also build a new plant in St
Petersburg, investing 22.6 billion yen.
Construction is to begin late this year, and
production will begin in 2009. The new plant will
have a capacity of up to 50,000 units per year. A
variety of vehicles will be produced. Last year,
the company sold more than 46,000 vehicles in
Russia, up from 28,000 in 2004. Nissan, which set
up a sales company in Russia in 2004, plans to
nearly double its dealerships in Russia to about
50 during fiscal 2007. "Russia is an important
part of our global growth strategy," Ghosn said in
unveiling the plans.
Meanwhile, Toyota
plans to develop a compact passenger car
specifically designed for emerging markets, and
plans to start selling it in India around 2010.
Nissan will also develop low-priced cars
specifically targeting the BRIC markets;
production of these models will begin in China and
Brazil as early as 2008.
Hisane
Masaki is a Tokyo-based journalist,
commentator and scholar on international politics
and economics. His e-mail address is
yiu45535@nifty.com.
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