The Exodus From Japan Begins In Earnest

It looks like Carlos Ghosn is tired of talking about the inaction of the Japanese government with regards to the killer yen. He told his people to start packing. The Nikkei [sub] reports today that Nissan will stop making in Japan newly developed cars for export from Japan. New cars will be produced at overseas plants.

“Under current foreign exchange rates, there can be no shipments from Japan of totally new projects,” Nissan’s COO Toshiyuki Shiga said. According to the report, anything with a new chassis that is intended for foreign markets will begin its life in those foreign markets. Says The Nikkei:

“Shiga’s comments suggest that there are few benefits to producing entirely new models for export in Japan because of the yen’s surge, but new models that use the chassis of existing vehicles can be exported as they are relatively less expensive to produce.”

Nissan makes only 25 percent of its worldwide volume in Japan. However, half of the Japanese production is currently exported. This will change.

In the interview, Shiga indicated that exports from Japan could fall to 400,000 units. At the same time, the Japanese market (which pays in yen) is supposed to absorb 600,000 units, so that the target of 1 million units can be maintained. In the fiscal year that ended in March 2011, Nissan’s Japanese production was 1.07 million units, of which 610,000 were exported and 460,000 were sold in Japan.

In early November, Toyota had announced a similar plan to maintain its commitment to make 3 million cars in Japan: Fewer cars exported means that Japanese will have to buy more cars domestically.

If the domestic sales don’t pan out as planned, both carmakers can say: “Sorry, we tried.”

Nissan’s plan sounds more decisive than Toyota’s. Usually, cars are developed and made at home first before they slowly filter abroad. Starting newly developed cars offshore inevitably will mean that R&D has to follow. Development and production must go hand in hand in close vicinity, at least in the early stages of the cycle.

Japan’s innovative power will be dismantled and shipped abroad. And that is a much bigger loss than a few cars. Japan will slowly turn into a 3rd world country. It used to be that those got the older cars, while new models hatched at home.