For a while, TTAC has been tracking a strange story: Instead of exporting cars, Japanese carmakers (or should we call them factorymakers?) increasingly resort to exporting car factories. The higher and higher yen makes exports prohibitively expensive. On the other hand, a higher and higher yen buys more and more production capacity abroad. From Nissan to Mitsubishi, there is a chorus that sings the song that suddenly, people in low wage countries can make high quality cars. Now nobody would assume that Japanese carmakers plan a wholesale desertion of the land of Nippon, right? Wrong.
Today, we find an odd statement in The Nikkei [sub]: Toyota denies that they will leave Japan. At least not now …
According to Japan’s premium business wire, “Toyota Motor Corp is not considering hastily shifting production overseas despite the yen’s strengthening against the dollar, President Akio Toyoda said Monday.” Hmm. Did anyone suspect he would? Apparently, yes.
“We will not readily shift production outside of Japan, except in the most unusual circumstances,” said Akio Toyoda, probably in the direction of the Japanese government.
The most unusual circumstances might already be here. “Theoretically speaking, Toyota cannot afford to compete with its rivals,” Toyoda says.
They can easily compete if they shift production to low cost, soft currency countries, such as Thailand, or straight to the end user markets, such as the USA and Europe. In the latter case, the problem of how the foreign currency looks when converted into Japanese Yen remains. For that problem, there is another solution, which nobody dares to utter: Shift the headquarters abroad. A few years ago, large German companies made noises about moving their HQ into lower tax countries. Opel (make that GM Europe) actually moved to Switzerland. The German government got the message.
The Japanese government (with which the carmakers are a bit at odds) is probably thinking about what to make of Toyoda’s not so subtle hint.
PS: Did I mention that anyone who babbles about a soft Yen should have his head examined? Just in case I didn’t, I mention it again. Long term hospitalization is advised.