Japan carmakers' June overseas output zooms ahead

Chang-Ran Kim writing for Reuters said that domestic production at Japan's five big automakers was mixed in June but overseas output mostly rose as the export-dependent industry tried to minimise its vulnerability to foreign exchange fluctuations.

The sole exception was the smallest of the five, Mazda Motor Corp, which produced fewer cars abroad than last June, reflecting its dearth of new models while it concentrates on cleaning up its balance sheet, company data showed on Tuesday.

Domestic output at Japan's top automaker, Toyota Motor Corp, fell by 5.6 percent from a year earlier to 282,186 vehicles, but its data showed that it more than made up for the drop with a 13 percent jump in output overseas.

At Toyota and Japan's number two car firm, Honda Motor Co, the decline in domestic output was largely a reaction to particularly big volumes around a year ago, when they were rolling out several hit models, analysts said.

Honda's production in Japan fell 3.2 percent to 117,525 vehicles, but it pointed out that there was one less production day compared to June last year. Its overseas production zoomed 7.8 percent, up for the 18th straight month.

Analysts said Japanese automakers would continue to move more production abroad to escape any damage from currency fluctuations and to take advantage of cheaper labour costs.

But top makers will have to increase production at home in the near term to keep up with strong demand for popular models abroad, they said.

Local media reported last week that Toyota would raise its domestic output plan for this year by 4.7 percent to more than 3.35 million since demand in the United States had been stronger than expected in the aftermath of the September 11 attacks and because U.S. production facilities may fall short of that demand.

"Globally, there should be a shortage of models such as the Corolla, Highlander and ES 300," said Tatsuo Yoshida, an analyst at Deutsche Securities.

CHARGING FORTH

That means that despite the recent strength of the yen, which makes Japanese products more expensive abroad, exports at carmakers with popular models will probably continue to rise, Yoshida said.

Exports at all five makers rose for the first six months of the year, with Toyota, Nissan and Honda posting double-digit growth.

But generally speaking, a continued appreciation in the yen should make exports less attractive and begin taking its toll on export figures, said ING analyst Kurt Sanger.

Firm production figures suggested Japanese carmakers are not worried about the fallout in the U.S. economy from a relentless string of accounting scandals and the subsequent fall in share prices there.

Global output at all automakers except Mazda improved, with Mitsubishi Motors posting the biggest year-on-year gain of 21 percent in June. In the first six months of the year, all five makers produced more than they did last year.

Third-ranked Nissan Motor Co's production at home inched up 1.5 percent, driven by orders for the new March car and the new Elgrand in Japan, as well as export demand for the X-Trail sport utility vehicle.

Overseas output also climbed 5.9 percent, with a sharp rise in U.S. production of 18 percent helped by strong demand for the new Altima.

Surprisingly strong figures emerged from Mitsubishi Motors, which scored a rise in domestic output of 2.2 percent, helped by strong sales of the eK-WAGON. Production overseas surged by an even bigger 40 percent.

The better-than-expected numbers sent Mitsubishi Motors's shares up 8.1 percent to 321 yen by the end of trade, far outperforming the one percent uptick in the transport equipment sector index.

Mitsubishi Motors spokesman Atsuo Imagawa said a double-digit rise in overseas production was in line with the recent trend, although he added that sales of the all-new Lancer sports sedan had been especially strong in the United States.

Mazda could also see better times ahead with the much-awaited launch of the remodelled Demio subcompact next month. Mitsubishi Motors will also unveil its Colt subcompact in November.

Shares of most automakers put on significant gains on Tuesday as the dollar staged a rare surge, by slightly more than one yen to 117.50 yen by late Asian trade from late U.S. levels.

Nissan gained 2.77 percent, Honda rose 3.54 percent and Mazda put on 3.27 percent. Toyota was the only loser, closing down 0.67 percent.