Honda as Japan's Exemplar

...Make where you sell, and that's not Japan...

For a while the impact on the auto industry of 3/11 – the earthquake and tsunami – and then the Thai flood garnered headlines. Lately the headlines in Japan have been politics, politics, and more politics. First there was the US election and the leadership transition in China – Japan's #2 and #1 trading partners. Then there are the upcoming elections in Japan and Korea. These have embroiled the auto industry, too, because of the attempt of various parties in China and Japan to wave the nationalist flag, with much of the fallout hitting bilateral Japan-China auto trade. All this has pushed more mundane news – the transition of the domestic Japanese auto industry – out of the headlines.

So here are two snippets, both using Honda as a foil, though these are more general issues.

First, there's the story – Alan Ohnsman at Bloomberg – that Honda will become a net exporter from the US. Why? – because they're ceasing Accord production in Japan. Of course Nissan is already bringing in the March from its plant in Thailand; Mitsubishi has also begun imports from there. But the yen is cutting into the attractiveness of production in Japan, while the domestic market is small: make where you sell, and that's not Japan.

Second, Honda has now moved into second place in sales for January-November 2012, with 701K units. Meanwhile Nissan, the one-time national champion, ranks fifth. (In third and fourth are Daihatsu and Suzuki; Toyota dominates with 1.55 million units, over twice Honda's level.)

What though is Honda selling? It turns out their success -- and that of Daihatsu [a Toyota subsidiary] and Suzuki -- is due to the growth of the "kei" (minicar) segment, vehicles with engines 360cc or smaller. In the full-size segment Honda is a distant 4th, more-or-less tied with Mitsubishi (29K vs 27K units) but far behind Nissan and Toyota. Indeed, in that segment Honda remains behind the importers BMW and Mercedes (at 32,000 and 33,000, respectively). But in compact cars they were second only to Toyota, and Honda sold enough "kei" to move them to the #2 position.

	Passenger Cars
	Standard	Small	Mini	Total	Trucks	Buses	Grand Total
Toyota	719,229	700,743	30,549	1,450,521	138,574		1,592,957
Honda	28,598	376,402	264,876	669,876	30,531	-	700,407
Nissan	186,042	224,609	117,382	528,033	91,317	1,460	620,810
Daihatsu	175	2,605	514,912	517,692	117,783	-	635,475
Suzuki	2,469	80,790	416,705	499,964	132,866	-	632,830
Mazda	81,212	61,204	39,253	181,669	24,305	-	205,974
Subaru	92,821	3,957	31,144	127,922	35,623	-	163,545
Mitsubishi	26,534	28,652	45,156	100,342	31,679	-	132,021
Others	181,382	30,867	19	212,268	1,804	64	214,136
TOTAL	1,217,756	1,396,773	1,349,335	3,963,864	663,013	10,399	4,637,276

Now domestic sales – cars, trucks and buses – peaked in 1996 at 7.1 mil units; in 2012, the level will be about 5.4 million units, down almost 25% despite the rebound from the depressed levels of 2011. So no one is doing well, and population aging means a declining number of licensed drivers. Things will not improve. But the mix is becoming bimodal, too. Full-sized cars are fine, quite possibly hitting a new peak of 1.5 million units (triple sales in 1990, during Japan's bubble). The shift is from compact cars to minicars. The former peaked in 1990 at 3.8 million units; 2012 will see sales of 1.6 million units. At the same time, minicars will hit 1.6 million units, up from 0.8 million in 1990. The market is thus split about 1/3rd each, but the shift is one that leaves a less rich product mix.

	Full	(share)	Compact	(share)	Mini	(share)	Cars Total	Trucks
1990	467,490	(9%)	3,839,221	(75%)	795,948	(16%)	5,102,659	3,639,909
1995	889,260	(20%)	2,654,291	(60%)	900,355	(20%)	4,443,906	2,403,825
2000	770,220	(18%)	2,208,387	(52%)	1,281,265	(30%)	4,259,872	1,686,599
2005	1,271,349	(27%)	2,089,992	(44%)	1,387,068	(29%)	4,748,409	1,085,904
2012 - Nov	1,318,462	(31%)	1,509,829	(35%)	1,459,996	(34%)	4,288,287	395,377

...mike smitka...