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Monday, December 10, 2012

Japanese Carmakers Building Lots Of Plants in North America

Nowadays, Japanese automobile manufacturers are constructing new North American assembly plants at an incredible rate to recapture a lost marketshare while reducing a dependance on Japanese manufacturing that is becoming more and more costly.

Caught in a Catch-22, Japan's shrinking workforce and seemingly endless recession has caused its own automobile manufacturers to move work offshore.

While Japan has long had automobile manufacturing plants in Canada and the U.S., by building more and more plants, it seems as though Japanese automobile manufacturers are giving up on Japan, though automobile companies claim that their focus is to replace the concept of the Japanese import with a North American producer car, is the real answer, knowing that especially in the U.S., consumers do like to 'buy American'.

But Japan is not alone.

While 100s of thousands of Japanese-brand trucks and cars will be built in American and Canadian plants by 2014, German carmakers are also expanding to the U.S, and Mexico.

"I wouldn't be surprised to see some Japanese manufacturers virtually cease vehicle production in Japan" over the next several decades, said Jim Hall, managing director of 2953 Analytics.

What does this all mean?
  • Greater competition in the North American market as sales rise and Europe and Japan stagnate;
  • Higher exports to the rest of the world from Japanese-owned plants in the U.S., Canada and Mexico.
"North America is a competitive manufacturing base," said Michelle Krebs, senior analyst at Edmunds.com. "It makes sense to build more cars here, especially when it's expensive to make them at home and U.S. sales will grow more than Japan."

Mexico has been the biggest beneficiary. Honda, Mazda and Nissan all plan to open new plants there in 2013 and 2014.

Japanese automakers are reducing exports from home because the strong yen has slashed profits on cars shipped from Japan to America. That's a major problem for small cars facing tough new competition from Korean and Detroit Three compacts and subcompacts.

"Japanese automakers are not able to charge premium prices for their small cars anymore," Krebs said. "Japan is a high-cost manufacturing base. Japanese automakers have to go to lower-cost production sites to offset their lost margins."

Experts believe that Japan is continuing to shoot itself in the foot, thanks to its aging work force population and virtually nonexistent immigration policy.

This is a deadly twosome, as any nation that wants to survive needs to welcome and support new manufacturing jobs. It just means that long-term, companies will shy away from Japanese exports.

Some folks speculate that in just a few years time after they see the gains in producing cars in North America, that Japanese automobile manufacturers will decide to construct 100 per cent of the cars for the North American market right in North America.

At this time, about 70 per cent of the vehicles sold by Toyota in the North American market are built in North America.

Wither Japan. While Japanese automakers expand and build new factories in North America, Japan may have to decide if it can continue to be a manufacturing country.

Cheers
Andrew Joseph

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