Japanese carmakers fortunes on rebound after listening to European customers’ demands

 Japanese automakers sales have suffered badly over the last few years while  South Korean rivals Hyundai and Kia have flourished. In August, Hyundai even eclipsed Nissan, the most European of the Japanese brands, to become the second best-selling Asian badge in Europe in the year to date after Toyota. However,  Japanese carmakers are fighting back by cutting costs and investing their profits from a weaker yen to ensure a strong European growth over the next few years.

Handicapped by earthquakes, tsunamis and floods that disrupted their supply chains around the world two years ago, companies including Mazda and Toyota initially focused on retaining their solid positions in North America, not wanting to adapt their U.S.-centric models for a European clientele.

As a result European sales dwindled, Japanese car manufacturers are now taking steps to win back business in the competitive European market, characterised as being  the most demanding market in terms of fuel efficiency, design, handling and build quality.   Their break through has been to introduce new models with smaller fuel-efficient diesel engines and smart interiors.

“Business has turned around. If you talk to most of the auto companies, it’s doom and gloom but our story is the exact opposite,” said Jeff Guyton, head of Mazda in Europe, in an interview at Frankfurt’s auto show, which ends this week.

Vehicle sales for the brand rose 11 percent in the eight months through August amid a European market that shrank by 5 percent, and average revenue per car sold is on the rise.

“We had the best fiscal first quarter in at least 10 years,” Guyton said.

At the Frankfurt auto show the  new Mazda3 was also unveiled, a compact fuel-efficient car that is set to compete with Volkswagen’s Golf. Mazda has already enjoyed success with its popular CX-5 crossover, which help lift European turnover since it launched last April.

Japanese carmakers have long profited from their reputation for reliability, but were upstaged when Hyundai and Kia brought out a range of stylish, affordable cars tailored to European tastes with extra-long warranties of five or even seven years. This helped the two South Koreans car giants attract European sales away from rivals such as Toyota.

“Japanese carmakers (sic) fundamentally missed the point about European design and interior quality,” said Mark Hall, who left the Japanese carmaker after 20 years to run Hyundai’s European marketing operations in 2010.

While the market share of Kia and Hyundai jumped to 6.1 percent last year in Europe from 3 percent in 2008, Japan’s seven traditional brands slipped to 11.8 from 13.7 percent.

Japan’s carmakers are now fighting back, however, improving handling and rolling out more wagons, a body style that is popular among company car owners in many parts of Europe.

Toyota is currently launching its Auris Touring Sports estate, while Honda will bring early next year the Civic Tourer, a model developed for the first time by a European and equipped with rear adaptive suspension to meet local demands for a sportier ride.

The Japanese carmakers have funded these changes by slimming down their operations. Toyota, for example, shifted all Auris production to its UK plant and moved some production of the Corolla sedan to Turkey from Japan and South Africa.

“At the same time that the weakness of the Japanese carmakers was being exploited heavily by the rapidly growing Koreans, the Japanese were busy putting their entire cost base to the test,” said Ernst & Young’s senior automotive advisory partner Peter Fuss.

Japan’s carmakers, who like to tout their expertise in hybrids and electric cars, are also following European trends by finally investing in a competitive lineup of diesel vehicles which constitute half the European market.

Toyota will now procure from BMW small 1.6 liter diesels, a popular European size that was missing from its engine range. Honda introduced its own 1.6 liter i-DTEC diesel for the European market, which it says will help provide a further boost to sales of its CR-V crossover and Civic hatch.

Mazda’s Guyton sees no reason to be downbeat despite figures that showed Europe’s new car market in the first eight months shrank to the lowest level recorded since 1990.

“Two years ago we structured our business to make a profit contribution to the company at 100 yen to the euro and 20 percent less volume than we have right now,” he said.”Now I’ve got new product, higher revenue and 130 yen to the euro, so we are contributing significantly to the company.”

Source: The Asahi Shinbun

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