The Japanese Luxury Market

Ford’s CEO, Alan Mulally, referred to Japan as, “the world’s most closed market for auto makers”. According to Automotive news domestic sales are 90% of the market. This means that automotive companies will have to struggle for the last few percentage points of the market share.

Recently companies have had success there (or at least more success). Specifically two companies have had increasing profits for the last few quarters: Maserati and VW. They have their best sales in the country since 1997. Maserati has doubled their volume in one year. This says something about the economy of Japan. When they can afford double the volume of a car that starts over $200k it demonstrates a significant increase in purchasing power. Even Mercedes-Benz has increased presence in the country, surpassing Lexus as the country’s most popular luxury brand.

How is Japan able to afford all these new luxury cars? The government was finally able to stop their 15 years of deflation by buying double the number of bonds last year. Automotive News states that, “Import car sales generally expand more in good economic cycles and shrink faster when economy goes down,”. With increasing numbers of women joining the workforce in Japan, we will probably see increasing gains in the Nikkei (Their version of the S&P 500). If the Japanese economy continues to grow then I believe the presence of foreign automobiles will increase in the next few years, especially these luxury brands.

maserati-sales-by-countries

6 comments to The Japanese Luxury Market

  • mayolj16

    This blog reminds us that even if the car manufacturers are trying to focus on China to increase their sales, there are still other big countries that have high purchasing power. Perhaps it might be a better strategy to focus in many other countries instead of putting all the energy in China where all the manufacturers are aiming now.

  • Kade Kenlon

    Tapping into another market as a car company is tough. Consumers will often build an alliance to the company that they have bought their cars from. Companies that are not in the Japan market currently will have to work much harder than the companies that are. They will need to prove that their car is more valuable and more impressive than the cars currently offered. Marketing will also be a huge for new companies as they will need to make it seem that buying their cars is a new trend and everyone is purchasing one. In recent years FIAT has made a strong push to improve their market share in the U.S. They have done a commendable job thus far and a lot of their success can be attributed to their marketing job.

  • Zachary Durkin

    I would be pretty wary of Maserati’s success in the Japanese sector. Luxury cars always have a plateau. Luxury cars are also very dependent on the economy. One recession in Japan’s economy and Maserati’s sales will plummet.

  • Louis Ike

    Japan has been in an economic slump for as long as recent memory serves me. It is nice to hear that the government’s expansionary monetary policy is gaining some traction and leading to at least some inflation and increased demand. I am curious though as to what extent the economy is growing as a whole, the surge in luxury vehicles may serve to point out that the gains are not equally distributed throughout the economy. If the latter point is true, then I do not see there being an easy road of continued growth in Japan as inequality levels rise it becomes increasingly difficult to stimulate and grow an economy.

  • Jier Qiu

    I think in countries like Japan and South Korea where patriotism plays a key role, foreign competitors will have a hard time jumping in and get a fair share of the market. I have been to both Japan and South Korea, I could say most people there drive their own brands of cars. Even in America, most Korean American friends of mine drive either a Hyundai or a Kia. Foreign companies need to consider the culture problem while entering another country. This is something a lot of people, even companies, have overlooked.

  • BMW and Mercedes (Volvo and others, too) dominated the luxury car market in Japan. Lexus was a late response by Toyota. Even as the Detroit Three railed on about closed markets, the two Germany luxury marques set up import processing facilities, service parts warehouses, dealership networks and a marketing presence. At one time BMW made more money in Japan than anywhere else in the world.
     
    The Japanese market is bifurcated, with rising shares for “full-sized” cars and for “kei” minicars. So luxury marques did OK even when the overall economy was less good (1992-2006, following their real estate bubble, but then the global economy crashed and then the 3/11 earthquake-tsunami-nuclear shutdown came).

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