By on January 22, 2010

Japanese car imports and exports 2008. Picture courtesy Nikkei

A lot of bandwidth is wasted in the blogosphere about how closed the Japanese car market supposedly is to foreign imports. Which of course is baloney. Paul Niedermeyer debunked the propaganda, and said: “Want to import cars to Japan? It’s one of the easiest countries to do so.“

In case people have not really gotten it, The Nikkei [sub] has drawn them a picture. It painstakingly lists how many cars were made by Japanese manufacturers at home and abroad. It shows how many cars were exported, and how many were imported.

Sure, fewer cars were imported than exported. What do you expect from a country that manufactured more than 11m cars, but bought only 5m at home? (All data 2008, exact import & export data not yet available for 2009.) There is a huge disparity between U.S. exports to Japan and Japanese exports to the U.S. Between Europe and Japan, the disparity is there, but it’s not so large at all. Japan to Europe: 779,752 units. Europe to Japan: 148,255 units.

Actually, people in Japan are worried: Europe is changing from displacement taxation to CO2 taxation. Says the Nikkei: “If the European method becomes a global standard, even carmakers with advanced environmental technology — such as Toyota Motor Corp. and Honda Motor Co. — would have to spend a lot on further technological development.”

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32 Comments on “Japanese Import Restrictions? Shall We Draw You A Map?...”


  • avatar
    John Horner

    “What do you expect from a country that manufactured more than 11m cars, but bought only 5m at home?”

    Doesn’t that beg a chicken and egg question? Why does Japan produce more than twice as many vehicles as it consumes? Perhaps the trade restrictions are minimal today, but there is little doubt that in the several decades immediately following WWII that was not at all the case.

    China is much the same today. Want to sell large numbers of vehicles in China? Well then, you are required to build them there in joint ventures with local (often government owned) companies.

    • 0 avatar

      Why does Japan produce more than twice as many vehicles as it consumes?

      Because it’s an export country. Not the only country. Germany also usually produces twice as many. Japan doesn’t have any import restrictions. Germany doesn’t have any either.

      China is much the same today. Want to sell large numbers of vehicles in China? Well then, you are required to build them there in joint ventures with local (often government owned) companies.

      Not true. You may import as many as you desire. Only if you want to build cars in China, you must enter a JV. China is the world’s largest market for the Mercedes S-Class. None are made in China. They like them. They buy them.

    • 0 avatar
      Stingray

      “Not true. You may import as many as you desire. Only if you want to build cars in China, you must enter a JV.”

      And what about import tariffs and taxes?

      You may be free to import whatever car you want, but at 100% tariff (example only) it will be VERY “attractive” to the customer.

    • 0 avatar

      You may be free to import whatever car you want, but at 100% tariff (example only) it will be VERY “attractive” to the customer.

      What 100% tariff? The Chinese tariff on imported cars is 25%. Coincidentally, the same rate the US imposes on imported “trucks.”

    • 0 avatar
      Robert.Walter

      Chicken Tax aside …

      Of those vehicles imported into Japan, how many are made by Japanese manufacturers? I seem to recall that Honda was shipping RHD accords, or accord wagons from the US to Japan …

      Feel free to tell me I am full of it, but I bet a Japanese OEM will find it easier to import a foreign-built verison of their vehicle to Japan than any non-japanese OEM will. (Some of this being due to japanese government chauvinism, some to better product and customer preference for it, some do to appropriate product and market desire for it, much of it being just due to scale effect…)

      I’m not trying to be a troll on this point, I am just curious about whether anyone knows the breakdown on imports to Japan, and how many of these are from japanese OEMs.

    • 0 avatar

      Robert: I don’t know how many of the American exports to Japan are “Japanese” cars exported to Japan. But I know for a fact that a lot of the “Asian” cars are.

    • 0 avatar
      holydonut

      I believe that if you want to sell a foreign vehicle in the Chinese market without a JV – then it’s still cheaper (or perhaps you’re required) to have the vehicle assembled in China. That is, you’re allowed to ship in the foreign sourced components as a CKD kit (complete knocked down), but Chinese workers must be involved in the end assembly.

      I really can’t think of an automaker that has ever just imported a completed vehicle for volume sale in China.

      BBC Article from 2003 describing how Mercedes would enter the Chinese car market with kits:
      http://news.bbc.co.uk/2/hi/business/2642107.stm
      “The idea is that Mercedes would send kits to China where they would be assembled by local workers.”

      I think India is the same way, automakers have an easier time sending over kits for local consumption in place of completed cars.

      Jan 5 2010:
      http://www.business-standard.com/india/news/bmw-beats-mercedes-in-luxury-stakes/381709/
      “The company today unveiled the new S-500 L car, priced at Rs 95 lakh (ex-showroom, Delhi). The earlier S-Class cars were imported as completely built units and priced at Rs 1.10 crore. The new S-500 L will be assembled (from CKD kits) at the Pune factory…”

    • 0 avatar

      I believe that if you want to sell a foreign vehicle in the Chinese market without a JV – then it’s still cheaper (or perhaps you’re required) to have the vehicle assembled in China. That is, you’re allowed to ship in the foreign sourced components as a CKD kit (complete knocked down), but Chinese workers must be involved in the end assembly.

      Baloney. Nobody forces you to do CKD production in China. You may import cars at will, as long as you pay the 25% duty. CKD is usually a way to circumvent higher duty for complete cars by importing “parts.” China blocked that by charging the same duty on parts as on cars. After a WTO complaint, they recently had to lower the parts duty to 10%, the whole car duty is 25%. Maybe that will give rise to new CKD production, not a (nonexistent) law that requires the involvement of Chinese workers. And BTW, if you go CKD, then you must start a joint venture.

      I really can’t think of an automaker that has ever just imported a completed vehicle for volume sale in China.

      I can think of many. VW has their own sales organization just for imported VWs (all the Touaregs are imported, for instance.) I have an imported VW downstairs in the garage.

      All luxury vehicles, top of the line BMWs, Mercedeses, Audis, said Touaregs, all Porsches, are imported. Once they sell “in volume,” then it’s simply better business to manufacture them locally. Taking the Mercedes example, the E-Class and C-Class are made in China, the S-Class is imported. China is the world’s largest market for the S-Class.

      Don’t rely on what you believe. I’ve lived in China since 2004, and I work in the business.

    • 0 avatar
      FromBrazil

      Mr. Schmitt

      I Don’t know about the rest of the world, but American cars are dream cars in Brazil and Latin America. Going back in history the Ford Galaxie and Dodge Charger were huge sucesses down here, though they were killed off (slowly) after the oil crises of the 70s. The Ford Falcon lived on much longer in Argentina than in its original home and was the top car there for many years.

      More recently the Ford Fusion is a big hit in Brazil. It outsells anything in its class except the Hyundai Azera which offers a V6 for the same price as a Fusion I4. In many newspapers and mags I read down here the Fusion was elected (by reader’s and not critics’ votes as the most significant and lusted after car of 2009.

      They don’t sell better because of price. But any Mustang, Corvette or Viper enjoys the same status as BMWs and Mercedes.

    • 0 avatar
      holydonut

      I’m under the impression that there are S-Class CKD assembled in China. The Wiki page (yes, I’m aware that’s hardly the bible of all valid knowledge) shows China as an S-Class assembly country… but as with all Internet things I’m sure that I won’t convince you that the S-Class CKD is real unless Dieter sens you an email.

      http://en.wikipedia.org/wiki/Mercedes-Benz_S-Class

      Maybe it’s a case where the Chinese CKD S-Class is later semi-CKD’ed down and shipped to Thailand or Malaysia or something, and not meant for consumption in China itself. I definitely can’t keep up with the subtle business dealings over there.

      There are no Porsche or Bugatti CKD assembly plants anywhere in the world… but that’s why I qualified my comment with “volume” since that’s the easiest way for me to explain why the Toyotas, VWs, Chryslers, GMs of the world go with JV subsidiaries or contract out CKD assembly.

      It’s very hard for a volume automaker to get their margins up to snuff where the 25% tariff makes more sense than the 10% on CKD imports. Thank you for pointing out that it used to depend on % of localized parts content. This goes to show how complicated the rules are to play in China.

      These comment boxes are too tiny to discuss the full ramifications of doing business in China. Tariffs for imported parts % and WTO quibbles are one component, but that’s hardly the end of the road.

      You have other issues such as repatriation of earnings/cash, taxes on corporate/partner structure, bribes (a pile of government-use W2 CKD Jeep Grand Cherokees goes a long way), regulations for qualifying a vehicle for legal use, and a host of other goofy factors. I don’t want to split hairs on what is overtly “regulated” versus the byproduct of severe bureaucracy and red tape. Bottom line is that volume automakers have a tough go in China without the JV or CKD business model.

      The USA has its fair share as well, but not nearly to the extent in China. If the USA had these types of crazy rules in place then you wouldn’t have a Lexus or a Mazda3 coming over as a completed vehicle from Japan. Instead, you’d have lots of 3-way JVs and CKDs going on in North America.

    • 0 avatar

      @holydolnut:

      Holy mackerel

      “Currently, most W221 S-Class models are built at the Daimler AG plant in Sindelfingen, Germany. Founded by Daimler Motor Company in 1915, the Sindelfingen plant also produced the model 600 “Großer Mercedes” and past generations of the S-Class.[8] Previous S-Class models (such as the W126) were built in different locations ranging from Stuttgart to South Africa, but with recent models (such as the W220) production has been concentrated in Sindelfingen. In February 2007, DaimlerChrysler Malaysia’s plant in Pekan, Pahang began production of S350 (model W221) vehicles.” – Wikipedia

      For your edification, Malaysia is not part of China. The few S-Class kits crated up in Sindelfingen and shipped to Pekan are a tax dodge.

      Pekan is not Peking, where E-Class and C-Class Benzes are manufactured (as opposed to bolted together from kits in a crate.)

      If you want to get the lo-down of what is where produced at Daimler, here is the official word (as of end of 2009, subject to change:) http://sustainability2009.daimler.com/daimler/annual/2009/nb/English/pdf/slide_2030.pdf

      There is no S-Class production in China, CKD or real.

      However,this detracts from the main argument: Import restrictions.

      Write it down: There are no import restrictions to cars, either to Japan or to China. In both countries, the car must comply with regulations, just like in the USA. In China for instance, the car must pass CCC certification. Since CCC more or less mirrors ECE, it is easy for an ECE compliant vehicle to pass. Japan has a similar regimen. Graciously, both Japan and China have regulations that dispense with certification for low volume imports. The USA has its own legal requirements, except that there is no dispensation for low volume imports.

      There are no volume restrictions to imports to Japan or China.

  • avatar
    Dynamic88

    Why does Japan produce twice as many cars as it consumes? Because their cars are good, and well adaptable to other markets.

    What cars would (do) the Japanese import from the US? Why for example would someone in Tokyo buy a Ford Focus? There are better Japanese made cars of the same size/class.

    OTOH, we would buy a Civic because it’s quite a lot better car than anything the US makes of the same size/class.

    • 0 avatar
      Robert.Walter

      Few would buy the more expensive Ford-branded vehicle, esp. when its virtual twin (styling aside) is built locally, carries a japanese nameplate (Mazda 3) and is cheaper.

      Not much is to be gained with the Ford over the Mazda, or any other decent japanese C-segment vehicle besides “gaijin elan”…

      But even while it is less so than in the recent past, japanese society is conformist, so there are still few types who look to stand-out by making such a purchase … gaijin-stuff works both ways … atractive for some reasons, repulsive for other…

  • avatar
    Stingray

    Let’s see some percentage numbers…

    Japan/UE: 19%
    Japan/USofA: 0.7%
    Japan/Asia: 18%

    Just the export/import relationship, not taking into account the local production.

    • 0 avatar

      Japan/UE: 19%
      Japan/USofA: 0.7%
      Japan/Asia: 18%

      What does this prove? Japan does a great job producing cars the world likes. Europe does a much better job producing cars the Japanese like. Cars made in the USA are for all intents and purposes unsalable in Japan.

      My father-in-law in Japan is a reasonably well-to-do man (as evidenced by his 8 car garage, a monster by Tokyo standards.) He’s a BMW guy (7-series and a X5.) His other car is a Golf. He’d rather commit seppuku than adding an American car to his collection.

      Outside of NAFTA, American cars generally are not an export hit.

      Also, the insularity of the FMVSS standard (developed by the USA as a non-tariff barrier to importation) bites the U.S. auto industry in the rear end. The rest of the world either is part of UNECE or mirrors the UNECE standards in theirs. The USA and Canada do their own thing. Foreign exporters, such as Japan and Germany, go to the pain and adapt their exported cars to FMVSS. American car makers think its an unnecessary burden and rely on Preferential Handling Procedures. Well, that’s one way to limit your exports (to 2000 a year.)

    • 0 avatar
      Robert.Walter

      I’m with you on all the other commets Bertel, but I differ wrt FMVSS and CMVSS … Aside from the few newer standards, the bulk of FMVSS was set up in the mid-1960’s, and came into effect in 67/68, with things like igniton interlock coming in 1970 and bumpers coming in 1973 …

      At the time all this regulation was being written, imports were such a minor share of the market … this was around, or not long after VW was the leading importer with a tiny 2% of the market …

      Americans don’t plan that far ahead as to write trade barrier safety specs in the 1960’s hoping to restrict imports in the 1990’s and 2000’s (else why would Detroit have fought DOT/FMVSS and EPA standards tooth and nail?) …

      FMVSS was set up to make the crap safety of US vehicles better (it could be argued that by making safer cars, the Big 3 would lose less market share, but I wouldn’t believe it), the EPA standards were set up to deal with NOx, Tetraethyl Pb, and unburned HC, not to stop imports…

      I would rather argue that many of the regulation schemes around the world were set up later, and just differently enough, to be protective trade barriers …

      I would also posit, that after being an early leader in all this stuff, the US fell far behind in the last 20 years …

    • 0 avatar

      The World Forum for Harmonization of Vehicle Regulations, a working party of UNECE, was established 1958, with the intent to remove the trade barriers caused by different standards. Notable non-signatories were the USA and (they had no other choice) Canada. Japan is a signatory. Like any other countries, the USA could have joined after 1995. They did not. According to the Wikipedia article in the link above, “the most notable non-signatory to the 1958 Agreement is the United States, which has its own Federal Motor Vehicle Safety Standards and does not recognise ECE approvals. ECE vehicles and components therefore cannot be imported or exported between the U.S. and most of the rest of the world without appropriate modifications.”

      The reverse is even truer. As you know, ECE insists on stringent type approval before the fact. The US rules rely on self certification. After something happens, NHTSA and swarms of lawyers are on you.

    • 0 avatar
      Robert.Walter

      I’m with you …

      I’m speculating here, but I think that the gap probably started with what were more or less, two separate market types (NA vs Eu) with different market needs (think Impala vs Käfer). BUX exports to Europe were somewhat of sideline for Detroit, so pushing globally unified homologation rules, was not really interesting to the Big 3 (esp. because their independent captive subsidiaries were doing independent development and production – Ford of Europe was not even mostly unified until the late 1960’s. Additionally, just consider the arrogance and hubris present in Detroit in the last 1/2 century and I don’t think there was a lot of fear about losing significant market share.)

      Conversely, the european and japanese OEMs had no real manufacturing presence in N.A. until the 1970’s so they would have clearly welcomed an opportunity not to have to modify vehicles for the US market.

      I would agree that the differences in standards may have, in the last couple of decades have been used as a barrier to easy entry.

      (But I think this kinda goes both ways … lighting is a good example … I think Europe has a superior headlamp beam pattern, but this is not adopted stateside … and the US had better side lighting standards (amber/red) and CHIMSL and these were blocked for some years here before being mostly adopted…)

  • avatar
    rnc

    http://www.fairimage.org/tradewithjapan.htm

    Yes Japan has no import tariffs etc. now but 40 years of blocking foreign involvement in Japan (I don’t mean importing, I mean producing and investing in the domestic market) isn’t undone in a few years.

  • avatar
    pgcooldad

    Let’s cut to the chase here. Even if (I know they were not) US built automobiles were better than Japanese, they would not have bought them, en masse. Sure you have a few rebels, but Japan being an ethnic homogeneous society, would not have turned their backs on their automotive industry, nor any other domestic industry.
    There may not have been economic barriers but there sure are social ones.
    Take a look at Nokia who as of 2008 had near 40% of the global cell phone market and yet could only muster 1% in Japan after 14 years. They pulled out.
    There is not big mystery as to why …. Japanese society is very prejudiced towards foreigners and foreign products.

    As written by an anthropologist born in the United States of Japanese immigrants studying Japanese-Brazilian immigrants who returned to Japan for work:

    “Approaching the native Japanese workers proved to be far more difficult than I could have imagined. I wore the same blue uniform as the Japanese-Brazilian factory workers, ate lunch with them in a separate room, clustered with them during breaks, and was heard speaking Portuguese. I was dismayed to realize that as far as the Japanese were concerned, I was as Brazilian as samba and carnival. None of the Japanese workers interacted with me socially: there were no greetings, no smiles of recognition in the morning, no small talk. They didn’t even bother to ask or remember my name; instead they simply called me gaijin-san (“Mr. Foreigner”). For me it was quite disorienting.”

    http://findarticles.com/p/articles/mi_m1134/is_3_113/ai_n5990766/pg_3/?tag=content;col1

    Are there any financialy valuable foreign products that dominate in the Japanese market? And Seven/Eleven doesn’t count, they are a Japanese company.

  • avatar
    bmoredlj

    Imports are also fewer in Japan because unlike the majority of Americans, Japanese generally have a great deal of pride in their enormous home auto industry. If both you and America (judging from sales) believe you make the best vehicles on Earth, why buy foreign cars? If it ain’t broke, don’t buy abroad; it’s just logic, mixed with a touch of honor and pride.

  • avatar
    Adamatari

    You know, considering the facts presented, I think blaming chauvinism is silly. It may play a part but sense outstrips it over time – the imports didn’t suddenly beat GM, Ford and Chrysler, it took them decades. American ‘chauvinism’ died to the tune of exploding pintos and (from the import side) cars that ran 100k miles with forgotten oil changes… What have we got to beat the Japanese with? Especially since their market is tilted toward small cars and kei cars, which we don’t even build!

    Similarly, in Europe the Japanese makes may not being doing as well as they do in America, but they do have market share that makes sense in light of their competition and the time it takes to establish a market.

    Simply, I think the Japanese makes have done more to try to sell the world cars than the world has done to sell cars to the Japanese. Toyota and Honda have American design studios – GM and Ford have never had Japanese design studios from what I know.

  • avatar
    Omoikane

    UAW/CAW propaganda wasn’t a complete waste – you could see that in many clueless comments.

    GM/Chrysler/Ford complaining about not selling cars in Japan is like
    those bad sports teams who, while getting their asses kicked on their home turf, are blaming not being able to score any point in the away games on the referee or public.

    Pick-up trucks ,F150 size, aren’t big in Japan. Way too big for those streets and a nightmare to park.
    For the rest of the line-up, the UAW companies are getting their buts handed to them here in North America. How the hell they figure they could compete in Japan…?

  • avatar
    Omoikane

    “Why does Japan produce more than twice as many vehicles as it consumes?”

    For exactly the same reason USA produces twice more grains than it consumes…

  • avatar
    davidbak

    Isn’t there also a little issue that Japan is a right-hand drive country and US automakers don’t build right-hand drive cars?

    • 0 avatar
      Robert.Walter

      Oh, they did and do build RHD cars …

      But over the years, as I considered the cost and effort to do the RHD conversion, and the small numbers that are sold, I have long wondered if there was really a profit in these efforts or if it was just an exercise in ego-buffing …

      Anybody got any facts on this??

  • avatar

    It’s not really trade restrictions, but more of what the market demands.

    European automakers were more successful in Japan since they limited themselves to luxury and niche cars. They would be mercilessly slaughtered if they sent over their bread-and-butter cars to compete with Toyota and Nissan in Japan. This is what Hyundai found out recently when they decided to stop selling cars in Japan.

    The Japanese are successful in the U.S. is they designed their U.S.-market cars for American tastes (e.g. American-market Accords and Camrys). The successful Europeans (Germans and Swedes) targeted the appropriate luxury car niches. This is one thing British Leyland, Peugeot, and Fiat never quite figured out.

  • avatar
    rch427

    I don’t mean to sidetrack the discussion, but I was wondering if anyone knows the regulations for importing an *old* car into Japan. I’m intending to move to Fukuoka in two years, and I’d love to bring my r.h.d. ’66 MGB-GT along. I’ve heard there’s something called a “model approval fee” which is something in the neighborhood of ¥200,000, and who knows what other kinds of hoops one has to jump through.

    Can anyone shed light on this?

  • avatar

    Too funny. Let’s get some facts out of the way:

    1. Ford and GM cars are competitive with Japanese cars everywhere in the world, but Japan.

    2. Ford and GM sell left and right drive cars all over the world.

    3. Ford and GM sell cars in Europe which has similar driving conditions to Japan.

    4. Prices charged on imports in Japan are 75-100% of the same price in the home market.

    • 0 avatar
      i_godzuki

      If I’m reading that right, point 4 is way off. Even now, with the yen sky-high imported prices are still far more expensive than the home market. Consider the Alfa Mito, for instance. In Japan, it’s starting price is 2.85 million yen ($30,800). Italy prices start at under 15,000 euros ($18,551.15)

      Or the VW Golf. The cheapest version sold in Japan costs ¥2,570,000 ($28,000).

      The Audi A3 starts at 3.05 million (33,000). That’s $6,000 more than the U.S. starting price and $4,500 more than the cheapest German price.

      This may be partly because the makers don’t sell the lowest spec models in Japan. Even so, foreign importers to Japan seem happier to sell small numbers of expensive cars (presumably with high margins) than compete on price in a home market where the eight or nine locals struggle to make much money.

  • avatar
    dodgeowner

    This article is does not tell the entire story of why American or European imports make up such a small percentage of the Japanese and Korean home markets. Just read a few sentence below and then check the other article as see “What the truth about cars” is
    Steve Biegun, a strategist for Ford, during a lecture in 2007 stated this about Ford’s attempts to break into the Korean car market

    * Ford was barred from airing advertising commercials except between 2 a.m. and 6 a.m.
    * Its showrooms’ floor space was restricted by government regulation.
    * Korean tax officials automatically audited anyone who bought a foreign car
    The tax audit tactic was copied from the Japanese. The Japanese also adjusted emission requirements, as needed, to block entry of foreign car makers, changing the requirements, while shipments of cars were in transit, so that they would not meet emissions specific ions upon arrival.

    What cars are allowed in are the more expensive luxury ones, the cars that don’t compete against the cars of the masses. Example Korea: The #1 selling car in Korea for 2011 was the Mercedes E300 CDi at just over 7,000 sold in a market of 1,484,082 cars sold or in other words a ratio of 7:1484 and that is the largest selling imported car, the rest have numbers even smaller than that.

    What about a total of 275,000 imported vehicles into Japan in a market of over 4,210,0000 vehicles? 275,000 vehicles divided up between 52 importers of which a few are Japanese nameplates.

    What about the closed parts industry in Japan, while there maybe a bias against foreign cars, a light bulb is a light bulb, a wiper blade is a wiper blade, show me a foreign parts suppliers not tied to a Japanese car maker that sells in Japan. Publish this list and the % sales in Japan.

    If you doubt what I type go to this web site, you will be stunned.

    http://counterpunch.org/2009/07/03/detroit-s-collapse-the-untold-story/


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