Japanese automakers expected to increase overseas production

Japanese automakers expected to increase overseas production

Christine Tierney / The Detroit News

Japanese automakers, grappling with a strong currency and flagging demand in their home market, are likely to boost production abroad, adding the equivalent of four assembly plants in North America by 2017, according to new forecast.

Toyota Motor Corp., Nissan Motor Co., Honda Motor Co. and other Japanese automakers now have the combined capacity to produce 5.36 million cars and light trucks in North America.

By the end of 2016, they're expected to add capacity totaling just over 800,000 vehicles, Masatoshi Nishimoto, a forecaster at IHS Automotive, said at a news briefing Monday.

During the same period, Japan's automakers are expected to boost capacity even more in India and other south Asian countries, Nishimoto said.

By contrast, Japanese output is expected to level off at about 9 million vehicles after peaking in recent years above 10 million.

Japan's automakers have established extensive manufacturing operations abroad over the years, tracking the growth in their overseas sales.

They are now accelerating the shift offshore after a three-year rise in the yen, to 82-83 yen to the dollar -- a level that makes it hard for Japanese automakers to earn money exporting vehicles. "It's getting very severe now," Nishimoto said of the yen's rise.

Toyota views currency fluctuations "as a cost of doing business globally," said company spokesman Jim Wiseman. About 65 percent of the vehicles it now sells in the United States are built in North America. "That's one way we minimize our exposure," Wiseman said.

Toyota recently resumed construction of a plant in Blue Springs, Miss., where it plans to build Corolla compacts.

Honda produces an even greater proportion of its U.S. vehicle sales in the region; Nissan plants will build the electric Leaf in Smyrna, Tenn., starting in 2012.

The leveling of the Japanese automakers' domestic output also reflects the gloomy demographics of their home market, which peaked in 1990. Japan's population is shrinking and its economy is recovering at a halting pace.

"The fundamentals are pretty poor," said Nigel Griffiths, chief automotive economist at HIS, which provides automotive analysis and forecasting. Moreover, young people in Japan don't seem as interested in vehicles as previous generations. "If you look at younger Japanese, they're not even taking driving tests five and 10 years after reaching driving age. This is an indicator," he said.

"It's a very urbanized society and they've got a lot of options," including top-notch public transportation, he said. "Japan will be the first country where we'll see a long-term reduction in the numbers of cars on the road."

For years, auto executives and analysts have said they didn't expect other countries to follow in Japan's footsteps. But they're no longer ruling out that prospect.

"Japan is an outlier," Griffiths said, "but Europe's next on the list because of its aging population and its transportation infrastructure."

From The Detroit News: http://www.detnews.com/article/20100928/AUTO01/9280320/1148/auto01/Japanese-automakers-expected-to-increase-overseas-production#ixzz10pQ319ki