More Japanese Cars Will NOT be Made In Japan Soon

TOKYO December 22, 2003; Nikkei reported that driven by brisk foreign sales, overseas production by Japanese auto manufacturers is expected to top 10 million units as early as 2005 and surpass their output in Japan, according to Monday's editions the Nihon Keizai Shimbun.

With the automakers beefing up their investments in overseas facilities, exports from Japan have fallen to nearly 60% of their peak level in 1985. Compounded by the long-term decline in domestic car sales, Japanese car companies may need to address the issue of excess production capacity at home.

Overseas output by Japanese automakers this year is expected to hit 8.5 million units, the second straight year in which it has recorded a double-digit gain. Toyota Motor Corp. , Honda Motor Co. and Nissan Motor Co. , which account for more than 60% of the total, plan to increase their production capacities in North America, Europe and China by at least 1 million units. As a result, the milestone of 10 million units for overseas production could be met in 2005.

On the other hand, Japanese production - for the domestic market and for export - is poised to reach 10 million units in 2003 for the second consecutive year. Of that, however, vehicles for export are likely to decline to around 4 million units. With auto sales in Japan remaining flat at around 5.8 million units, domestic production could soon fall to less than 10 million units.

In the early 1990s, output capacity at domestic facilities totaled around 14 million units. Nissan and Mitsubishi Motors Corp. closed down some production lines by the end of that decade to streamline their operations. With Toyota and Honda also revamping their production facilities, the Japanese auto industry succeeded in alleviating about 4 million units worth of excess capacity.

But with domestic production levels expected to tumble to around 9 million units, the automakers will be required to make additional adjustments to their output capacity. Such declines will, in turn, impact the operations of Japanese autoparts manufacturers that are highly dependent on domestic auto production.