About The Authors

Friday, December 7, 2012

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...