Japan Carmakers Suffer Market Share Loss
Japanese carmakers are caught in a race against time as they try to shift production overseas to compensate for falling profits on shrinking market share due to lost production resulting from the March 11 quake and tsunami.
The good news is that Japan’s auto production capacity is recovering faster than earlier forecasts. The bad news is that they will have to make a heroic effort to win back lost market share overseas despite a steadily strengthening yen. All the major Japanese carmakers have decided to shift production overseas to cut costs as one way to recover some of their falling profits.
Nissan’s group operating profit for the business year to next March is expected to fall 14.4 percent to ¥460 billion ($5.7 bil.) on a stronger yen and higher raw materials costs despite a sales increase from ¥8.77 trillion ($109 bil.) in fiscal 2009 to ¥9.4 tril. ($116.8 bil.) in fiscal 2010.
“Production and sales have already returned close to normal conditions,” Nissan Corporate Vice President Joji Tagawa told a news conference in Yokohama. The problem is that its group net profit is projected to drop 15.4 percent to ¥270 billion ($3.35 bil.).
The company expects production at all plants to return fully in October as parts suppliers resume full delivery.
Toyota has forecast a36 percent drop in operating profit for the business year.
Honda is projecting a 65 percent lower operating profit.
“Their production will recover soon once the capacity returns,” said Masato Sase of Deloitte Tohmatsu Consulting. “But that doesn’t mean their earnings will come back at the same time.”
In the U.S. market Toyota’s new car sales dropped 33.4 percent in May from a year earlier, while Honda’s sales dropped 22.5 percent and Nissan’s fell 9.1 percent.
Much of that lost market share has gone to Hyundai which gained 20.7 percent and Kia which saw a 53.4 percent jump, according to Autodata.
Toyota’s share in the U.S. market fell 4.6 percentage points to 10.2 percent in May while Honda lost 2.0 percentage points to 8.6 percent and Nissan slipped 0.4 percentage point to 7.2 percent. The Hyundai-Kia group rose 2.8 percentage points to 10.2 percent, according to U.S. National Automobile Dealers Association.
“It would be natural for Japanese automakers to have stronger momentum to shift production focus to other countries amid the current strength of the yen and the strong demand in the global vehicle market,” said Issei Takahashi, auto analyst at Credit Suisse.
Toyota produces about 50 percent of its vehicles overseas, less than the 70 percent share for Nissan and Honda. In May Toyota has said the recent sharp rise in the yen makes it difficult for the company to maintain its current level of domestic production. It has said it would have to cut costs by 20% to maintain its global competitiveness at pre-quake levels.
Toyota already has a plan to open a plant in Blue Springs, Mississippi, this autumn to assemble Corolla compacts for sale in the U.S. market, rather than assembling them in Japan and exporting them.
Nissan is aggressively shifting production overseas. Last July, it moved its all-new March compact to Thailand instead of at its plant in Oppama, Kanagawa Prefecture. In 2010 it imported 26,965 March cars from Thailand.