Autos

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

U.S. automakers' failure to sell their cars in Japan has been a gripe for Detroit since the Carter administration. Another round of whingeing looks set to begin.

"It's not fair," the Nikkei Asian Review quoted President Donald Trump as telling a meeting of chief executives at the White House Monday. "They do things to us that make it impossible to sell cars in Japan."

On the numbers, he appears to have a point. Ford Motor Co. announced last year it was pulling out of Japan, saying the nation was the most closed developed auto market in the world.

Artisanal Cars
Morgan's hand-made vintage cars typically outsell GM's Buick brand in Japan
Souce: Japan Automobile Importers Association

General Motors Co. is an even smaller presence. Its mighty Buick marque typically sells fewer units in Japan than Morgan Motor Co., a family business based in an English spa town that hand-builds about 1,300 Jazz Age-styled cars a year.

Only Fiat Chrysler Automobiles NV does better, with its Jeep brand selling more models in Japan than GM and Ford put together. But SUVs are a rare presence on Japanese roads, so that makes Detroit's third player a decent-sized fish in a very small puddle.

Prime Minister Shinzo Abe has a different explanation for U.S. automakers' failure to compete: They're simply not trying. They don't advertise on television, exhibit at the Tokyo Motor Show, or even make much effort to build vehicles for Japan's right-hand-drive market, he said Monday.

They also have to battle consumer perceptions that they're costly and poor quality, something for which the government can't really be blamed.

The truth is largely on Abe's side. While the U.S. has a 2.5 percent tariff on all passenger car imports and imposes 25 percent on trucks, Japan removed its last levies on auto imports almost four decades ago.

Imports are certainly a small share of the market, but they're on the rise -- going from about 4.5 percent of sales in 2012 to 5.9 percent last year.

Turning Japanese
German automakers have prospered in Japan even as their U.S. rivals shrivelled
Source: Japan Automobile Importers Association
Note: Figures for VW include Porsche & Audi; Daimler includes Mercedes-Benz, Smart and Maybach; BMW includes Mini and Alpina; Chrysler includes Jeep and Dodge; GM includes Cadillac, Chevrolet, GMC, Hummer, Buick, Pontiac.

Volkswagen AG, Daimler AG, and BMW AG have together sold more than a million cars in Japan over the past five years, compared to about 68,000 for Detroit's big three, according to data from the Japan Automobile Importers Association.  Daimler has doubled its sales into the country over the period, and BMW offloads about 3 percent of its vehicles there.

It's hard to get away from the impression that Detroit never really tried that hard in Japan -- a perhaps understandable myopia, given that the U.S. auto market is about three times the size.

When a previous bout of bilateral tensions in the 1980s led to complaints that the likes of Toyota Motor Corp. and Honda Motor Co. were destroying American jobs with their imports, Japanese automakers set up a fleet of factories and now produce more than 70 percent of their U.S. sales domestically.

Detroit hasn't shown the same gumption. The industry has often complained about Japanese auto dealers' ties to manufacturers, which can result in imported brands being less favored in showrooms. But they've rarely translated their complaints into action.

Along Tokyo's Meguro Dori, an artery out to wealthy suburbs in the west of the city, smart dealerships present a welter of European marques, from Maserati, Mercedes-Benz and BMW to middle-class stalwarts Peugeot and Chinese-owned Volvo. Not immediately apparent: any offerings from the big three Americans.

Or look at what happened when Ford introduced its Ka micro car in Japan in 1999 in an effort to turn around flagging sales. It didn't bother to install one of the automatic gearboxes that are most popular there, and the fact Ka means mosquito in Japanese didn't help either.

There was a time when U.S. automakers made an effort to get around the peculiarities of the Japanese auto industry by forging local partnerships.

GM bought a third of Isuzu Motors Ltd. as far back as 1971, and moved to effective control of the business through a 49 percent stake in 1999 before selling out seven years later. In 1981, it purchased a share in Suzuki Motor Corp. but that, too, started to wind down in 2006, with the U.S. company clearing out in 2008 as it struggled to raise cash to avert bankruptcy.

Ford had a third of Mazda Motor Corp. thanks to a 1979 investment until the 2008 financial crisis sent it looking for cash as well; the remaining stub was finally sold in 2015.

The withdrawal isn't all that surprising. On a trailing 12-month basis, Japan's auto sales topped out all the way back in 2001 at almost six million vehicles. They're now below five million, a 17 percent decline from the peak.

Land of the Setting Sun
Japan's trailing 12-month car sales have fallen by 17 percent since they peaked in 2001
Source: Ward's Automotive, Bloomberg Intelligence, China Automotive Information Net, Gadfly calculations

When you consider that around 40 percent of Japan's auto market consists of kei cars -- tall, boxy micro-engine vehicles that look more like a child's drawing of a car than an actual car -- the market for the sorts of vehicles the rest of the world buys is barely bigger than in the U.K.

For all the global heft of Japan's automakers, the country's domestic car market isn't a particularly attractive investment zone. That's the best explanation for why Detroit has left the field.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. We've only counted cars sold under the Jeep, Dodge and Chrysler marques toward Chrysler's total, since the other Fiat Chrysler brands have historically been part of Fiat.

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net