The Truth About Cars » closed market The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Thu, 17 Jul 2014 20:36:40 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » closed market A Game Of Chicken Tax: Detroit Drops Pretenses, Wants To Keep Japan Out For As Long As Possible Sun, 07 Jul 2013 12:47:11 +0000

Detroit is finally dropping the mask and says what it really wants in U.S. / Japanese trade relations. It wants to keep existing barriers that frustrate importation of Japanese cars, and that, for all intents and purposes, prevent importation of  Japanese trucks. For the next generation, Detroit wants to be in your pocket without outside interference.

Japan is formally joining negotiations on the proposed Trans-Pacific Partnership (TPP) agreement next month in Malaysia. Despite, or possibly because of shrill rhetoric based on lies and deception, Detroit could not prevent it.

Last week, a U.S. government panel led by the Trade Representative’s Office held a hearing to get advice on negotiating objectives for Japan.

“Now that Japan is part of the negotiations,” wrote Reuters,  the American Automotive Policy Council, a lobbying group representing GM, Ford, and Chrysler, “is trying to hold on to the current 2.5 percent tariff on Japanese cars and the 25 percent tariff on Japanese trucks for as long as it can.”  The unions joined the pleas to keep trade barriers against Japanese imports in place. “Thea Lee, deputy chief of staff for the AFL-CIO labor federation, said eliminating the 2.5 percent duty on Japanese cars would gut the Detroit automakers’ profit margins, especially for small- to medium-sized cars.” Reuters says. “Getting rid of the 25 percent truck tariff would eliminate the incentive for Japanese companies to build trucks in the United States, putting U.S. jobs at risk.”

According to Reuters, “Japan already agreed in principle that the phase-out period for U.S. auto tariffs would be the same as the longest phase-out for any other product in the pact.” The longest phase-out would be the pact with for South Korea, which eliminates the 2.5 percent U.S. car tariff after four years and the 25 percent U.S. truck tariff after 10 years.

Detroit and the unions finally drop the charade that all they are interested in is an opening of the allegedly closed Japanese car market, which has been wide open.  The 25 percent chicken tax, along with skewed CAFE rules created a protected market for overpriced trucks that are safe from foreign competition. Detroit wants it to be protected for as long as possible, and the price to be paid by the American truck buyer.

In its representations to the panel, the AAPC still reiterated that Japan “maintains the most closed auto market in the developed world,”  but nobody except Detroit and the unions believe the tired lies anymore. Hard pressed to name the non-tariff barriers it blamed for the low sales of American cars, the AAPC lamely demands that Japan adopts more UNECE rules, while the U.S. does not adopt any.

In contrast, the Japanese Auto Manufacturer Association JAMA delivered short and very polite comments:

“At times during the Japan TPP debate in the U.S., misunderstandings have led to statements that Japan’s market is closed to imports.  In fact, Japan has zero auto tariffs and no restrictive customs or regulations only apply to imported vehicles.  With regard to dealerships, there is no restriction on the brands or vehicles dealers in Japan can sell and Japanese automakers cannot intervene in these dealer decisions.

In the case of the Japanese market, it is essential to note that Japanese consumers overwhelmingly prefer very small cars, which U.S.-based automakers rarely provide.  In 2012, smaller passenger cars, those with up to 2,000cc in engine capacity, had a 90 percent market share in Japan.  However, the U.S.-based automakers offered only five models in this segment while European automakers offered 87 models.  Accordingly, European car sales and market shares have been rising.  These realities confirm that a critical factor to success in any auto market is to offer sufficient choices of models that appeal to local consumers.”


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Detroit News Declares Japanese Price War, Needs New Calculator Thu, 20 Jun 2013 12:20:51 +0000

Yesterday, the Detroit News warned of a sneak attack by the Japanese on the U.S. auto market:

“Nissan Motor Co.’s take-no-prisoners approach to gaining U.S. market share has the auto industry worried that a price war is brewing that will erode the profit progress made since the recession ravaged auto sales.”

According to the Detroit paper, Nissan’s recent price reductions  are

“the first sign of a Japanese automaker taking advantage of the weakening yen that Prime Minister Shinzo Abe has pushed down to improve Japan’s economy. That currency’s 15 percent swoon versus the dollar since Oct. 31 gives Japanese automakers an extra $1,500 per car they can use to cut prices or offer additional features while keeping prices even.”

It’s only a sign if you are both blind and fact-resistant.

Nissan lowered the price of its Altima by $580, and its sales “jumped 41 percent, surpassing Ford Motor Co.’s Fusion and closing in on Honda Motor Co.’s Accord,” reports the DetN from the price war front.

Joining the militaristic metaphors is Michelle Krebs of Edmunds. Nissan’s price reductions “strike me as a scorched earth policy of going for market share and sales volume at seemingly all costs,” Krebs said.

What they all forget or simply don’t mention is the fact that the Altima, along with  more than 70 percent of the cars sold by Nissan in the U.S., does not come from Japan. The cars are made in North America. The cars are completely decoupled from the yen.  “By 2015, Nissan  aims for 85 percent North American production,” says Nissan’s Yokohama spokesman Chris Keeffe. “We build where we sell.”

Last week in Nagoya,  Toyota’s America-Chief Jim Lentz said the same, and he flatly denied  that the cheaper yen has any influence “either on price or on the equipment level – we price to market, not to a currency rate.”

The fact that a car made in North America can’t get cheaper just because the dollar buys more yen in Tokyo seems to be too complicated for the Detroit paper and its Detroit sources.

Or possibly, both simply trust that they can play the American public for a big fool.

The DetN missed a scoop: The yen actually is nearly 20 percent cheaper than on Oct. 31, not 15 percent, but numbers are not the DetN’s strong suit:

When Nissan shaves $580 off an Altima to get its formerly lackluster U.S. sales going, then that’s a “price war” invl the DetN’s book. When GM takes $5,000 off the price of a Volt, then “Detroit has implemented discounts on some models, such as the Chevrolet Volt plug-in hybrid, and offered promotions such as free oil changes,” writes the Detroit News, reporting live from the alternate reality .


And this is Mulally on drugs: Allegedly manipulated “cheap” yen should be a lot cheaper to trade at “normal” levels

Ford especially has been pushing the tale of “the Japanese manipulate the yen”  for years, even when the yen was obscenely high. It always found journalists to go for the story. Just hours ago, Alan Mulally told Bloomberg that “Japan is “absolutely” manipulating its currency,” and while he was at it, “that Japan is a closed market for U.S. automakers.”

While this inanity may play well in Idaho, neither the Detroit carmakers nor the Detroit News scribes are that stupid. Most likely, they set the scene for bigger discounts and smaller profits, while blaming it on the people they usually blame, the Japanese.


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Volkswagen: “Japan Is Not A Closed Market.” Mon, 05 Nov 2012 18:05:47 +0000

“No, Japan is not a closed market, come on, it has zero percent duty on cars.” Such spoke Yasuo Maruta, Communications Director of Volkswagen Japan, today at Volkswagen’s  Tokyo offices. Volkswagen Group sold 66,000 cars in the first ten months of the year in Japan, and is expected  to sell roughly 80,000 by the end of the year, making it Japan’s largest car importer, a title it held for as long as I can remember.

Maruta’s employer wants to enlarge its footprint in Japan. As a contribution to Strategie 2018, Volkswagen alone wants to sell more than 100,000 cars in Japan. Together with Audi , that would amount to roughly doubling its sales.

Volkswagen is not worried about the non-tariff barriers alleged by the American Automotive Policy Council on behalf of its paymaster GM, Ford and Chrysler. American companies have for all intents and purposes given up on the Japanese market. Instead of selling cars, they sell fiction about closed markets, manipulated currencies and threatened U.S. jobs. All Detroit brands together sold a little over 10,000 units in the first 9 months in Japan, a fraction of Volkswagen Group’s imports.

Maruta has a hard time coming up with hurdles that may be in the way of successful imports. “Type approval procedures are much less of a problem than in the past,” says Maruta, while noting that Japan’s preferential Handling Procedure allows small series of up to 2,000 units into the country with the barest of paperwork.   Pressed hard to find something, he says that his company currently cannot import cars with CNG tanks into Japan. (Volkswagen’s Passat CNG hybrid is not available in the U.S. either.)

Volkswagen wants to expand its sizable dealer network in Japan, something that would be impossible if the propaganda of the anti-Japan lobby is to be believed. “Sure, land for dealerships is expensive in Japan, especially in the cities,” says Maruta.  Except for a lack of money or patience, nothing bars an importer from establishing dealers  in Japan. “Market entry takes a lot of time and money,” says Maruta, “you must go step by step.”  Volkswagen has been in Japan since the ancient times of the original Bug.

Maruta is very familiar with the issue. Before coming to Volkswagen, he worked for Mazda, then GM. He recalls “when Toyota sold the Chevrolet Cavalier, I sold Saturn, and Chrysler tried to sell the Neon, they called it the Japan killer car, but unfortunately …”

Being a company that is heavy on small cars, Volkswagen has issues with Japan’s special treatment for Kei cars. Says Maruta: “Automotive tax for a kei is some 7,200 yen ($90) a year, compared  to say a Vitz for which you would have to pay more than 30,000 yen ($374) a year.” Kei cars have 33 percent of the Japanese market, a segment Maruta’s employer can’t touch, because Volkswagen does not have the product.

Nothing precludes a foreign manufacturer from making and importing a kei, but it would be a silly exercise.Volkswagen’s design chief Walter de Silva “drew us a schematic, showing that he would need a completely new platform for a Volkswagen kei car,” chimes in Maruta’s collegaue, Dorothea Gasztner. “An outsider would never reach the volume necessary for a successful entry into the kei car market.” Even Japanese car companies battle with the low volume of keis. Production more and more concentrates on a few key makers such as Daihatsu and Suzuki that produce keis for other Japanese car companies. Subaru for instance handed its kei car production to Toyota’s Daihatsu, in return, Subaru manufactures the low volume hachi-roku sports car.

Volkswagen tried with an engagement with Suzuki, but it was thwarted. Not by a non-tariff barrier, but by a rambunctious Osamu Suzuki.  Now, Volkswagen, along with importers allied in the Japan Automobile Importers Association, lobbies  for an end of the preferential tax treatment of kei cars.

Another limitation to successful entry into the Japanese market is the Japanese customer that predominantly prefers homegrown cars.  Maruta hopes to convince more. A recent study shows that 25 percent of Japanese car buyers would consider a foreign car, “whether they buy one is another matter,” Maruta says.

The key is having the right product that speaks to the peculiar Japanese psyche, where small is beautiful, and big is boorish. Volkswagen found that product in the small but peppy Up! that shapes up to be Volkswagen’s most successful Japanese product launch ever.   In a few days (and after we have found a magnifying glass) we will look closer at the success of the Up!  in Japan.

In October, sales of cars imported to Japan rose 20.1 percent year-on-year to 23,597 units, data released by the Japan Automobile Importers Association show.  January through October, 257,206 units were imported.

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