October 16, 2009 A Postcard from the Asia Pacific Japan: Revving Auto Industry Boosts Export Hopes

The Tokyo Motor Show, a biennial event, has been one of the world’s premier auto shows ever since its inception in 1954.

The prestigious Tokyo Motor Show, set to run from October 23 to November 4, has seen its last major foreign exhibitor pull out barely a week before its launch. This has left the show, once the glittering celebrity-studded automotive spectacle in the world, bereft of some of the biggest international global brands. Is this a sign of the times?

It would indeed appear strange that the world’s biggest auto companies are shunning a show that is showcasing as many as 39 world launches and 21 Japanese premieres. Yet, foreign automakers pulled out citing their own economic woes. Running alongside is the undercurrent that Japan has never been easy for the international vehicle manufacturer. Japan’s vehicle market has always been skewed heavily in favor of its own domestic brands – whereas in the U.S almost 55% of all vehicles sold have a foreign nameplate, in Japan it whittles down to just a tiny 5%. A discouraging import tariff barrier means that foreign vehicle manufacturers have barely managed to stake a toehold in Japan. As well, the government encourages exports of high-value manufactured goods such as cars, making it possible for Japanese vehicle manufacturers to ship and sell cars around the world at competitive rates.

Digging deeper, there is a flipside to the tale. Japan’s biggest vehicle manufacturers are all revved up and raring to go. For them, it appears to be business as usual after the serious hiccups suffered earlier this year. Despite the recent slump, Japan remains the world’s third largest auto market. Although it might soon be overtaken by speeding China, Japan also is the world’s biggest car producer having an output of 9.916 million vehicles last year. Encouragingly, for the first time in 13 months in August, the Japanese auto industry posted a year-on-year increase of 2.3%, selling 198,265 units for that month, spurred in part by ex-Prime Minister Taro Aso’s incentive measures. That trend continued in September when industrywide sales rose 0.2% over a year earlier to 477,818 units. That is quite a comeback from the industry’s 38-year low, slumped into in March as consumer confidence dipped. Yet, the Japanese government is keeping its fingers crossed that the auto sector, so crucial a cog in the country’s export wheel, will continue its revival once the stimulus effect fades. It is this – Japan’s export dependence-- that also contributed to the country’s severe fall during the ongoing global recession. Despite the late revival in domestic sales, it is clear that overall sales might fall to their lowest this fiscal. Not surprisingly, most Japanese manufacturers have set their sights overseas – to promising markets in China, India, the Philippines, and of course, the U.S., which remains one of the biggest buyers of Japanese cars.

Japan’s auto industry has for long been the pivotal force driving the country’s exports. And when its exports improve, Japan as an economy improves. The Tokyo Motor Show might be just the opportunity for Japan to burnish its former luster in the world.