Japan Carmakers Continue to Overtake US Competitors

Toyota set to overtake Ford as world's number two carbuilder.

Published: 31-Dec-2003

ONG>TOKYO Toyota Motor, Honda Motor and Nissan Motor, Japan's three biggest automakers, plan to unveil at least 12 new models at the Detroit auto show, as they continue to build their share of the world's biggest car market.

Toyota, poised to overtake Ford Motor as the world's No. 2 carmaker by unit sales this year, may bring at least five new or revamped cars, such as a hybrid version of the Highlander sport utility vehicle, to January's North American International Auto Show. Nissan, Japan's third-largest automaker, may show four new models, including a revamped Frontier compact pickup.

Toyota, Nissan and Honda Motor, which make as much as 90 percent of their operating profits in North America, took 24 percent of the U.S. market in the first 11 months of 2003, up from 22 percent last year. They are gaining at the expense of General Motors, Ford and DaimlerChrysler's Chrysler unit, whose combined share fell 1.6 points to 60 percent.

"The most attractive thing about Japanese brands for North American consumers is that they keep releasing new, fuel-efficient, high-quality models," said Norihito Kanai at Meiji Dresdner Asset Management. The new vehicles "will help them continue to take more market share."

Toyota, No. 4 by sales in the U.S., employs about 166,000 people in that market alone, including dealerships and affiliates. Japan's biggest carmaker is raising North American production capacity by 40 percent to 1.6 million units by 2006, in part by opening two new plants in Mexico and Texas.

Toyota shares rose 13 percent in Tokyo in 2003, lagging a 20 percent gain in the benchmark Topix transportation equipment index. Nissan surged about 32 percent in the same period, while Honda gained 8 percent.

U.S. sales for Japan's biggest three automakers rose by 3.7 percent to 4.42 million units in the January-November period, and will probably rise in 2004, said Koji Endo of Credit Suisse First Boston Japan. In the same period, total car and light truck sales there fell 0.5 percent to 15.2 million and the three largest U.S. makers dropped 3 percent to 9.15 million.

Industrywide, U.S. auto manufacturing has about 25 percent overcapacity. Even so, Toyota, Honda and Nissan will probably continue to run their local plants at full capacity, Endo said.

The Japanese automakers' gains have been spurred in part by new models such as Toyota's revamped Prius gasoline-electric hybrid and Nissan's Murano SUV. They have also been helped by strong performance in surveys such as J.D. Power Associates' annual auto-quality study, published in May, which Toyota led for a sixth straight year, followed by Honda.

At the Detroit show, which opens to the press on Sunday, Toyota will unveil more models, such as the Scion tC sports coupe, a new full-size pick-up truck concept, its latest hybrid Lexus RX330 sport utility vehicle and the GS series luxury sedan.

"We have mid to long-term strategies to shield ourselves from currency fluctuations, in part by increasing overseas production and boosting local purchasing of parts and services when making our products abroad," Toyota's president, Fujio Cho, said.

The yen has strengthened about 11 percent against the U.S. dollar this year, deflating the value of Japanese exporters' overseas earnings. Toyota's operating profit drops about ¥20 billion, or $187 million, for each 1 yen exchange rate gain against the U.S. currency, Credit Suisse's Endo has said.

Nissan will display at least four new models at the show, including a revamped Frontier compact pickup, the Pathfinder mid-size sport utility, a new crossover concept vehicle, and the Infiniti QX56 full-size SUV.

The automaker's May opening of its first new North American plant in 20 years in Canton, Mississippi, will help speed up Japanese automakers' advances into the market, said Kunihiko Shiohara, an analyst at Goldman Sachs Japan.

The new plant is part of Nissan's plan to boost North American production capacity by 70 percent in the four years to 2006, the most ambitious expansion there of all the world's seven biggest automakers.

Honda, the fifth-biggest carmaker in the U.S., will unveil at least three new models at the show. These will include a modified Odyssey minivan, a new Acura luxury sedan and the SUT crossover concept, built on the same platform as the Odyssey and blending features of a pickup and an SUV.

The SUT, in which the company plans to use as many locally-made parts as possible, will be sold with a 3.5-liter V6 engine, starting in the second quarter of 2005.

Honda, which is doubling annual light-truck production capacity at its Alabama plant to 300,000 units next year, will raise total North American capacity by 15 percent to 1.4 million next year. Honda plans to release at least two new light trucks in the next three years.

"I'm not saying Japanese automakers are doing enough," said Honda's chairman, Yoshihide Munekuni, who also heads the Japan Automobile Manufacturers Association. "They need to try even harder" to produce locally and use more local resources, he said.

Honda's U.S.-made Accord sedan has more than 98 percent local content, the company said. About two-thirds of Japanese automakers' cars sold in the U.S. are locally made, with the rest made in Japan, Munekuni said.

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