Will Neon Be The Little Car That Could In Japan?
To Americans, Chrysler Corp.'s Neon subcompact is cute. But the Japanese press is calling the Neon a "Japan car killer." Whatever you call it, a right-hand-drive Neon will finally arrive in Japanese showrooms on June 15 after months of hype.
The Neon launch shapes up as an important test case of U.S. makers' ability to score in Japan. In the year since the controversial Japan-U.S. auto agreement, America's Big Three have been struggling, spending millions to establish organizations that will enable them to compete seriously in Japan. Neon's debut also marks Chrysler's first big step out of the Jeep niche and toward a wider product line in Japan. "This car is crucial," says Chrysler Japan Sales President Hideo Hohgi.
INVESTED. Chrysler is making a serious effort to sell in Japan. America's No.3 auto maker paid $100 million last summer for control of a small network of Japanese dealerships. In April it opened a $10 million inspection center and parts depot in Kanagawa Prefecture, two hours from Tokyo. Chrysler has also invested $180 million in developing right-hand-drive models for Japan and other international markets.
By the end of the year, the company plans to have five right-hand-drive models available in Japan: three Jeeps, the Neon, and the Voyager minivan. The Japanese subsidiary is also pressing for a high-end right-hand-drive model such as the Stratus or Cirrus to complete its lineup. Last year, the Jeep Cherokee was the company's only product in Japan.
Neon is aimed at Japan's toughest market segment, the small sedan. The Japanese buy some 3 million such autos each year--almost half of Japan's car market--and competition is fierce. Neon goes wheel-to-wheel with such popular cars as the Toyota Corolla and the Honda Civic. Next to the 340,000 Corollas or 121,000 Civics sold in Japan last year, Chrysler's target of 8,000 Neons for 1997--eventually going to 20,000 units per year--looks insignificant. But as yet, only four imported models have sold more than 10,000 units in a year: the Volkswagen Golf, the Mercedes C-Class, the Opel Astra, and Chrysler's Cherokee.
Chrysler agonized over how to position Neon in the Japanese market. Originally, the company intended to compete solely on price, focusing efforts on a low-end, stripped-down, $12,000 model. But Chrysler decided that low price alone wouldn't sell in Japan. Instead, Chrysler will push a midrange Neon at $15,000, the same price category as the most popular Corolla. But Neon buyers will get a bonus--a more powerful, 1.96-liter engine vs. Corolla's 1.5-liter engine.
Before Chrysler can persuade Japanese consumers to buy, it must persuade more dealers to stock its cars. Chrysler has only about 125 outlets, compared with, say, Honda Motor Co.'s 1,800. Adding dealers, says Osamu Nagata, vice-president in charge of marketing for Chrysler Japan Sales, is still the toughest task facing the Big Three. U.S. makers must also persuade salespeople to actually sell the cars, especially in multibrand showrooms. Some 80% of the 15,000 Jeeps bought in Japan last year were sold through Honda, which has no plans to sell Neons. An education and incentive program for salespeople seems essential.
Chrysler is spending $5 million on advertising in the initial three months of the launch, targeting first-time female buyers aged 24 to 36 and male buyers aged 30 to 49. Some 70% of the ad budget is for 30- and 50-second television spots. Just as in the U.S., the car zooms up to the camera--only in Japan it says, "Konnichi wa. Neon desu (Hello. I'm Neon)."
The Neon should appeal to the Japanese consumer. The car has a distinctive front end, is basically the right size, and comes with standard features such as dual air bags, which are still expensive options on many Japanese models. Even the mighty Toyota Motor Corp. is taking notice. "We've seen a real improvement in the imports," says a Toyota spokesman. "It's definitely making things more interesting." If Chrysler's Neon can squeeze out just a fraction of the market share of Toyota, Nissan, or Honda, it will have widened the crack in the door to Japan.