The European debt crisis has pushed the value of the yen up in relation to the euro in ways that are making a lot of Japanese exporters anxious. As one industrialist told NHK the other night, it isn’t the same as the yen’s rise against the dollar, a development they can counteract at least partially by increasing production in the U.S. There’s relatively little Japanese production capacity in Europe.
Tokyo Shimbun wonders why the drop in the euro hasn’t helped Japanese buyers of European cars. While some other European products have dropped in price over the last year due to the exchange rate, cars have stayed the same. The given reason is that manufacturers decide on prices only once a year, so short-term currency rate fluctuations aren’t necessarily reflected on sticker prices. However, another reason came from an anonymous industry insider who told the newspaper that makers of European automobiles “have a responsibility to maintain brand value” to customers who pay more under the assumption that when they trade in the car down the line they’ll get more money for it. Given that trade-in values of automobiles in Japan are quite low to begin with, this explanation sounds only half right.
To put things into perspective, the value of the euro against the yen has decreased 40 percent since 2007, when it was more than ¥160. During the 2011 calendar year it lost ¥8, which means a windfall of ¥370,000 to makers for a car priced at ¥5 million. And despite the ongoing recession, the number of imports sold in November was 30 percent higher than the number sold in November 2010. According to analysts interviewed by Tokyo Shimbun, Japanese car buyers preferred European cars for their “energy saving qualities and performance.” Certain models, in fact, are so popular they’re on back order. Consequently, there is absolutely no incentive to reduce prices, and Japanese customers don’t really expect it the way they expect Japanese makers to lower prices in order to be competitive.
The fact is, the high yen gets a lot of press in Japan because Japanese manufacturers count so much on overseas sales. Market share in the U.S. and other regions is extremely important. In contrast, the Japan market is a relatively small one for European carmakers. And since many of them have over the past decade bypassed local importers and set up their own dealerships, they can more or less do what they want, and that includes ignoring the social pressure of reflecting the high yen in their prices.
Yet another reason for good sales is the March disaster, which disrupted supply chains for Japanese cars. Foreign car supply was unaffected, resulting in a 7 percent increase in sales (95,452 total sold) for the first half of 2011 alone. BMW, which now sells the Mini, enjoyed an 8.7 percent increase. Interestingly enough, out of all the exporters Volkswagen sold the most and yet saw a decrease of 3.2 percent over the previous year.