Earthquake, nuclear catastrophe force rethink on Japanese auto industry strategy

Nishimoto expects global vehicle production to come in at 72 million vehicles this year, 2 million lower than initially anticipated prior to the disaster in Japan. He was speaking at the recent Asian Petrochemical Industry Conference in Fukuoka, Japan.

The earthquake and nuclear accident have highlighted the frailties of the Japanese supply chain model in the temblor-prone nation, with offshore assembly operations reliant on key components manufactured in Japan also having been affected. Moving forward, Nishimoto says that Japanese OEMs will look to enhance localization of parts outside of Japan, utilize India and ASEAN nations as export hubs for small vehicles, and increase their focus on China in order to hedge against supply chain risk. "They may minimize production volume [in Japan] and manufacture there only to maintain employment and plant utilization," he notes.

While Japanese OEMs dominate the ASEAN market (the top five suppliers are also Japanese with a combined market share of 65%) and they also have a strong position in the Indian market, they do not feature among the top five suppliers in the albeit fragmented China market, which is forecast to grow to 26.6 million vehicles in 2017. In order to successfully compete in the China market, Nishimoto feels that Japanese OEMs will have to develop exclusive cars for China rather than market "global vehicles."

Japanese OEMs also face intense competition in the price sensitive Indian market from the likes of Tata's ultra-low-cost Nano, which has already garnered an 8-9% market share. "Besides Suzuki, Japanese OEMs will look to utilize India as an export hub for global small cars for the European, Middle East and African markets," says Nishimoto. 6.8 million vehicles are forecast to be sold in India in 2017. Another export hub will be Thailand, serving global markets including Japan itself. By 2017, the ASEAN market is expected to reach 5.1 million vehicles.‑[email protected]