Japan car makers seek to keep tech lead as yen bites
Osamu Suzuki, chairman of Japan's Suzuki Motor, inspects the company's concept vehicle called the 'Q-concept' during the Tokyo Motor Show in Tokyo, Japan. (Nov. 30, 2011). Credit: Getty Images
Japanese automakers unveiled futuristic concepts such as car-powered houses and rechargeable sports cars at the Tokyo Motor Show, but the stubbornly strong yen cast a pall over the industry, threatening their chances of keeping the lead in next-generation technology.
The biennial auto show, which opened to the media on Wednesday, showcased the usual array of green cars such as electric vehicles (EVs) and fuel-cell cars, while top Japanese brands went further to depict how cars could eventually link up to the grid and store energy in their batteries as a power source.
The idea of capturing solar power or unused and cheaper nighttime electricity in cars to power households has gained traction in Japan after the March 11 earthquake and tsunami cut off power to millions of households and triggered a nuclear power crisis.
But the prolonged strength of the yen, at around 78 to the dollar now, has eroded profits in Japanese automakers' domestic market, hurting competition against rivals such as South Korea's Hyundai Motor Co and Germany's Volkswagen AG globally.
"The biggest worry I have right now is, yes, Japanese automakers have a lot of excellence in technology and manufacturing, but will they keep that excellence?" said Christopher Richter, an auto analyst at CLSA Asia-Pacific Markets.
"Building new technology requires money. If you're cash-starved, your global competitors aren't going to cut you any slack from the difficulties in Japan. If (Japanese automakers) don't change, there's going to be a slow erosion of competitive advantage which they can ill-afford."
Japanese car makers are wrapping up a year of unprecedented challenges including the disasters at home and disruption also from the Thai floods, but the yen's appreciation against virtually all other currencies has posed the biggest headache.
'HELP US STOP THIS'
Japan is known for its expertise in "monozukuri", or manufacturing, and is also a breeding ground for high-tech parts, especially in electronics from makers such as Denso Corp -- strengths that executives from Volkswagen and BMW AG acknowledged in Tokyo this week.
But executives have also warned that without a reversal in exchange rates, they would be forced to reduce exports from Japan, which would then slash overall production because the sliding domestic market cannot make up the difference.
"Our base and our roots are in Japan, and our strengths are in Japan. So we have absolutely no interest in moving out," Nissan Motor Co CEO Carlos Ghosn told reporters.
"That's why we're talking to the government -- we're saying, 'Help us stop this.'"
Ghosn went on to give an impassioned warning that the strong yen would ultimately hurt the country more than it would hurt Japanese car makers, which had the option of shifting operations abroad. If Tokyo continued without strong action on the yen, he said, half of the 4 to 5 million Japanese jobs responsible for exported vehicles could be at risk.
Ghosn, who also heads Renault SA, said Tokyo could learn from Switzerland, which had succeeded in stemming the Swiss Franc's rise as investors took flight from the euro.
"Switzerland is a great benchmark about how a small country -- much smaller than Japan -- at a certain point in time they drew a line in the sand and they said, 'Enough is enough'. Everybody laughed, but they prevailed."
Nissan was profitable in every region in the world except Japan, Ghosn said, noting that the yen's current level was unreasonable and a "handicap". Its bigger rival, Toyota Motor Corp, is losing about $3 billion a year in Japan.
