Japan makes more cars outside the country

JAPAN MAKES MORE CARS OUTSIDE THE COUNTRY

According to the report by Japan Automobile Manufacturers Association the 12 car and truck makers in Japan, which include Toyota, Honda and Nissan, Built 10.93million vehicles at their overseas factories in the last year It compares with 10.89 million vehicles that they produced in Japan, the group said.

The milestone indicates that the long time strategy of Japanese auto makers to globalize production is paying off. More important the trend will probably continue, and analysts say the pace may even be stepped up. Hitting a milestone, Japanese car makers produced more vehicles abroad than at home for the first time last fiscal year.

Analysts said the figures reflected a recent scramble to increase production in China and grab a foothold in the world’s fastest-growing major car market as well as their strong sales in the US, where Toyota, Honda and Nissan have all expanded production.

At the same time, local production helps Japanese carmakers shield their revenue and profits from currency swings and helps them tailor designs to local tastes. As growth in China and elsewhere in Asia continues, Japanese carmakers are well positioned to move in, and their rapid expansion plans, which bring jobs and tax revenue to the localities, have made Japanese automakers welcome investors in many countries.

Japan’s production expansion abroad also reflects how the industry has changed from the 1980’s and early 1990’s, when Japan’s surging auto exports were a source of bitter trade disputes with economic partners like the US. The first Japanese car plant in the US was Honda’s factory in Marysville, Ohio, which opened in 1982..

Since then, Japanese production has expanded on every major continent. According to 2005 figures, the most recent breakdown from the Japan Automobile Manufacturers Association has 4.08 million vehicles made in the US, 3.96 million in Asia, 1.55 million in Europe,645,000 in Latin America, 226,000 in Africa, 135,000 in Australia and 10,500 in West Asia.

While Japanese companies have been building cars overseas for decades, it is only in the last few years that they have essentially ended their reliance on cars and major car parts exported from Japan.

Analysts said the figures also reflected the robust global demand for fuel-efficient Japanese cars at a time when General Motors and Ford had seen big losses on their North American operations. As companies like Nissan and Honda earn a majority of their sales and profits from overseas markets like the US, they have been building more cars abroad to be nearer customers, analysts said.

“Japanese carmakers are going where their business is,� said Koji Endo, an analyst for Credit Suisse First Boston here. It’s a natural decision, given that their growth these days is all overseas.� Analysts say carmakers began stepping up overseas production in the 1990’s as strategy to avoid trade-related criticism by reducing reliance on exports, and by becoming large investors and employers in the market where they sold vehicles.

More recently they have expanded local production for economic related reasons, analysts said. Local production helps shield prices and profit margins from swings in value between the yen and the dollar and other currencies. It also allows them to cut shipping costs. The saving have become crucial as all car makers have come under intense pressure to lower prices even as the cost of raw material like steel and rubber has risen. Fuel economy in running is another factor which Japanese cars are contributing significantly.