TOKYO, Japan—The final time Shujiro Urata needed to purchase a brand new automotive in Japan, his telephone occurred to ring. It was the native Toyota seller on the telephone, asking him if he was eager about shopping for a brand new automotive. When he replied within the affirmative, the seller and a co-worker confirmed up at Urata’s doorstep an hour later with two demo vehicles, which Urata and his spouse test-drove across the neighborhood. The Uratas determined to purchase a automotive from the seller. The seller additionally handles their automotive insurance coverage, coming to their residence at any time when the insurance coverage contract wanted to be renewed. The Uratas deliver of their automotive to the seller each few weeks for a free automotive wash, the place they hang around and speak to the workers, who’ve grow to be their mates, about canine breeds and household birthdays.
The rapport could sound uncommon to Americans, who’re about as glad to voluntarily go to a automotive seller as they’re to get enamel pulled, however the relationship between buyer and automotive seller is a typical one in Japan. “It may sound like a lot, but Japanese customers are used to this kind of service,” Urata, who can be an economics professor at Waseda University in Tokyo, advised me. “It is a kind of custom that American dealers aren’t used to.”
This hospitality has helped Japanese automakers keep dominant within the Japanese market. Japanese manufacturers account for about 90 p.c of the home auto market in Japan, in line with the Japanese Automobile Dealers Association. In the United States, against this, home manufacturers have a a lot smaller share of the market. The Big Three—General Motors, Ford, and Fiat Chrysler—make up 45 p.c of the market, whereas Japanese manufacturers make up 39 p.c, in line with auto-sales information from the Wall Street Journal. The dynamic contributes partly to the commerce imbalance between the United States and Japan. The U.S. commerce deficit with Japan final 12 months was $68.9 billion, and a big share of that surplus—$52.6 billion—got here from autos and from automotive components, in line with the Department of Commerce.
This has lengthy bothered politicians together with President Trump, who this week is touring to Japan and different components of Asia, the place one in all his objectives will probably be to “emphasize the importance of fair and reciprocal economic ties,” in line with the White House. Earlier this 12 months, when Japanese Prime Minister Shinzo Abe visited the U.S., Trump mentioned that the Japanese “make it impossible to sell cars in Japan.” This can be the road being touted by American carmakers, which accuse Japan of protectionist insurance policies in its vehicle market. The American Automotive Policy Council says that historic practices like requiring prolonged automotive inspections of foreign-made autos and prohibiting current automotive sellers from promoting international vehicles have prevented international corporations from gaining a big market share.
But protectionism will not be the complete clarification for why Japanese individuals don’t purchase international vehicles. There aren’t any import tariffs on vehicles, for instance, whereas the U.S. and European Union impose 2.5 p.c and 10 p.c tariffs. And whereas Japanese vehicles are right-hand-drive, requiring manufacturing modifications earlier than American vehicles may be offered there, that is no completely different from many different markets the place international vehicles are prevalent.
Instead, the issue is largely that American automotive sellers have been hesitant to spend money on the form of seller community that buyers like Shujiro Urata have come to anticipate. “The way Japanese consumers buy cars is very different,” Deborah Elms, the chief director of the Asian Trade Center, advised me. “Yet the Americans have not invested in a dealer network to break into the market.” Indeed, Ford pulled out of Japan, the place it had offered solely 5,000 vehicles yearly, final 12 months. General Motors solely has 28 dealerships in Japan, and offered about 1,000 vehicles there in 2016.
Ford didn’t reply to requests for touch upon this story. A General Motors spokeswoman advised me that the corporate offered about 1,000 autos in Japan final 12 months. It lately made a “strategic decision” to focus on area of interest segments, she mentioned, and provide Japanese drivers left-hand drive American autos together with the Cadillac ATS.
Japanese prospects additionally anticipate to obtain providers like free upkeep from their sellers after they purchase their vehicles, Urata mentioned. When their vehicles want a check-up, the seller comes and picks them up, does work on them, after which returns them. American sellers don’t provide such providers. “Developing this network is expensive, and maintaining it is expensive, and that’s one reason U.S. car makers decided to withdraw,” he advised me.
I talked to a Japanese man named Hideo Ohashi, who has solely purchased Toyotas in Japan. He has thought of shopping for a Mercedes-Benz, he advised me, however he fearful that it could be too costly and prolonged to get new components if his automobile breaks down. A good friend of Ohashi’s has a European automotive and it takes weeks to get components from the maker, Ohashi mentioned. What’s extra, Toyota has a broad upkeep community, so it’s simple to get his automotive mounted if there are issues. Ohashi has know his Toyota seller for 10 years, he advised me, they usually contact him a minimum of as soon as 1 / 4. “We have a person there who has taken care of our family for a long time,” he mentioned.
It would seemingly be price it for U.S. corporations to spend the cash to spend money on the same dealership community in Japan. The Japanese auto market is the third-largest on the earth, behind the U.S. and China. And the Japanese economic system is presently booming, which means customers have additional spending cash for vehicles, particularly luxurious ones.
Of course, there are some historic causes that made it initially onerous for U.S. automakers to promote vehicles in Japan. U.S. corporations arrange store in Japan within the first half of the 20th century, permitting Japanese carmakers to be taught their know-how. But throughout World War II, U.S. companies had been banished from Japan and weren’t allowed to return. After World War II, Japan did defend its auto market, and its home manufacturers grew and competed with one another, changing into very environment friendly. By the time Japan opened its market within the 1970s, Japanese individuals had been accustomed to purchasing home vehicles.
But this alone shouldn’t have been sufficient to take care of Japan’s dominance in its home automotive market. U.S. corporations have made inroads in nations like China which have extra restrictive commerce insurance policies than Japan, in shorter quantities of time—General Motors now sells extra vehicles in China than it does within the U.S., for instance. (Although the marketplace for vehicles in China is bigger than it’s within the U.S.) Japanese corporations elevated their presence within the U.S. marketplace for a long time, even after the U.S. requested Japan to impose voluntary export restraints, limiting its export of vehicles to the U.S., in 1981. (Those restraints led Japan to open up manufacturing services within the United States.) And international corporations have begun to promote extra vehicles in Japan, with few complaints about Japan’s commerce insurance policies. The variety of imports of U.S. autos in Japan shrank 15 p.c between 2013 and 2016, to 19,933, whereas imports from the European Union grew 5 p.c in that point interval, from 251,115, in line with Urata. Brands like Mercedes-Benz and BMW noticed gross sales grew 60 p.c and 23 p.c, respectively, between 2012 and 2016.
I visited a brand new BMW dealership in Tokyo to search out out why European carmakers are doing higher in Japan than U.S. automakers. The newly-opened dealership is positioned in Tokyo Bay, close to a deliberate 2020 Olympic park, and is 27,000 sq. meters. Walk into the dealership and also you’ll encounter a separate espresso store run by Nescafe the place anybody, not simply individuals enthusiastic about vehicles, can sit down on the many tables and order specialty espresso drinks and desserts from waiters. There are smooth vehicles and bicycles in an unlimited showroom, whereas one other showroom sells automotive equipment and BMW memorabilia. The model holds occasions on weekends, inviting kids to come back and play with remote-control vehicles on a monitor.“In Japan, everything is about hospitality,” Peter Kronschnabl, the CEO of BMW Group Japan and the chairperson of the European Business Council’s Automotive Committee and the Japan Automobile Importers Association, advised me. “If you are not into this, it will be very difficult to succeed in the Japanese market.”
Kronschnabl mentioned that BMW three years in the past determined to redouble its efforts within the Japanese market. It’s spending 580 million Euros to refurbish its seller community. Now, anybody who enters a BMW dealership will probably be met by a greeter and a “product genius,” who can inform them concerning the vehicles’ options—salesmen historically went too quick to a gross sales pitch for Japanese customers’ tastes, he mentioned. BMW is attempting to alter its processes in order that its workers have extra of a relationship with prospects, he mentioned. It delivers vehicles to prospects who purchase them, and has a “delivery bay” the place prospects who purchase new vehicles can get them delivered in a brand new automotive ceremony that some Japanese prospects request.
There are, in fact, sure specs that need to be modified for the Japanese market, he advised me. Because Japan is such an city society, vehicles are sometimes saved in garages or in compact spots that require vehicles to be mild and small. Door handles of the vehicles within the BMW three Series are made to be barely narrower in Japan than in different nations, for instance. But these aren’t commerce limitations, they’re shopper preferences that manufacturers can select to adapt to or to disregard. BMW determined to adapt to those specs as a result of Japan remains to be one of many greatest markets on the earth. Despite their complaints about commerce limitations, U.S. corporations haven’t made the identical efforts.
This story is a part of a collection supported by the Abe Fellowship for Journalists, a reporting grant from the Social Science Research Council and the Japan Foundation Center for Global Partnership.