Honda expects to shift all but a small amount of production out of Japan over the next decade.
Honda will halve, perhaps cut by two-thirds the number of vehicles it exports out of Japan over the next decade, according to the maker’s CEO.
The move follows reports that Toyota, the industry giant, will shift production of more of its Camry models to the United States. Other Japanese makers are reported to be considering production shifts out of their home market, as well.
Toyota Chief Executive Takanobu Ito told the Asahi newspaper that the decision was made in responsive to the fast rising yen, which recently hit a record level against the dollar. But industry analysts say that Japanese leaders have also been exploring their production options in the wake of the devastating March earthquake and tsunami that sharply curbed automotive production for the following six months.
Like its rivals, Honda has steadily expanded its production base in North America, Europe and other parts of the world and is putting a premium on building its base now in China and other emerging markets. Of its total global output of 3.57 million vehicles during the last fiscal year, only 910,000 – about 34% — were produced in Japan.
But Ito said that could drop to as little as 10 to 20% in 10 years. And even maintaining that level will require the maker to shift the production base in Japan to focus on the minicar segment – those with engines under 660 ccs. Because of rising fuel prices and tax incentives, that market niche is one of the few bright spots in the long-stagnant Japanese automotive market.
Exchange rate shifts are a serious concern for Japanese industry as a whole. The yen rose to a record 75.94 to the U.S. dollar in August before settling back slightly. That compares with an average of around 120 yen to the dollar as recently as 2007. Industry analysts say it is difficult for automakers like Honda to turn a profit on even the most high-end models at anything under 80 yen and the situation is compounded when it comes to smaller products that have lower margins to begin with.
The situation is only slightly better when it comes to exports to other markets, such as Europe, where the yen hit a record on Tuesday at 102 to the Euro.
Compounding the situation, the March 11 disaster that roiled through much of Northeast Japan underscored the island nation’s vulnerability to earthquakes and tsunamis – as well as its ongoing problems with electric capacity triggered by the meltdown at the Fukushima Daiichi nuclear plant.
Like its competitors, Honda saw much of its capacity idled by quake-fostered parts shortages and only recently got its global network back up to capacity.
As TheDetroitBureau.com yesterday reported, Toyota is considering moving more of its Camry production from Japan to its plant in Georgetown, Kentucky. Some of those vehicles would be shipped to Korea, where Camry is one of the best-selling imports. (Click Herefor the full story.)