Europe Turns to Japanese Cars
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Breaking Habits, Europeans Turn to Japan's Cars
By JOHN TAGLIABUE
ALENCIENNES, France ? When the 5,000-ton presses at Toyota's big new plant outside this northern French industrial city slam down, the concrete floor under Toshiharu Takasu's feet trembles.
For decades, varying national tastes, trade barriers and the inclination of many European automakers toward creative design made most of Europe inhospitable terrain for Japanese cars in contrast to the United States. But now, the pounding presses at the Toyota plant are a kind of metaphor for a recent Japanese automotive assault on the Continent.
To the delight of managers like Mr. Takasu, the plant manager here, but to the dismay of French, German and Italian auto executives struggling with moribund sales, more European buyers are deserting their Fiats and Volkswagens in favor of Toyotas, Nissans and Hondas.
Many of the hot-selling Japanese models have been designed and engineered specifically for Europe, and fall in the small and midsize segments that account for the bulk of European sales. But buyers are also attracted to larger Japanese models.
Sales of Japanese cars in Europe jumped almost 7 percent last year, to 1.64 million vehicles, while the overall car market contracted 3 percent. In the first half of 2003, as the market shrank 2.6 percent further, Japanese car sales climbed by an additional 6 percent.
Still, only about one new car in eight sold in Europe is a Japanese model, up modestly from the one-in-nine share that held steady for a decade. In the United States, the Japanese manufacturers have 28 percent of the market.
Fresh models are behind the recent Japanese growth, most of this in the compact category, the largest in Europe: the Honda Jazz, the Mazda 2, the updated Nissan Micra and the redesigned Toyota Yaris ? known in Japan as the Vitz and built here in Valenciennes, near the Belgian border. With more new models in preparation and new factories planned or under construction in several countries, Europeans' flirtation with Japanese cars is expected to continue.
The sprawling Toyota plant here illustrates the promise. It was built for $570 million and opened in January 2001, with plans for an annual output of 150,000 cars. But by last year, the demand for the Yaris was so strong that production was ratcheted up to 184,000 annually. A further $100 million in investment will step up capacity to 240,000 cars next year.
"This is really quite good," said Mr. Takasu as he gazed at charts tracing the rising output and the swelling bonuses that his employees will receive for surpassing targets.
What made the difference in Europe for the Japanese auto industry was a benign combination of lowered barriers to Asian imports, evolving European habits in car purchasing, and the automakers' decisions to start replacing imported models with new ones designed locally.
Now, in markets like France and Italy that long resisted Japanese cars, "people are realizing they're not turkeys," said Karl E. Ludvigsen, a former Ford executive who is an independent consultant in Britain. It is beginning, he said, "to be socially acceptable to have one in the driveway."
For decades, European drivers saw Japanese cars as reliable and robust perhaps, yet bland and lacking in personality. The Japanese companies are starting to overcome that reputation by tailoring their new models to European tastes. The Micra, for instance, came out of Nissan's new design center in London; Toyota's latest incarnations were created at a design center it opened in Provence, in southern France, in 2000.
The European Union still levies a 10 percent duty on cars imported from Japan, four times the duty that Washington assesses. So all the big manufacturers now build cars in European Union countries. Honda has factories in Britain; Nissan, there and in Spain. It said recently that it would spend 400 million euros ? $454 million at current exchange rates ? to expand the production of sport utility vehicles at a factory in Madrid and diesel engines in Barcelona, in hopes of selling 20 percent more vehicles in Europe over the next two years.
Toyota and Peugeot broke ground recently on a $1.5 billion joint factory in the Czech Republic to build very small cars for city use, and Toyota is adding a transmission factory and an engine plant in southern Poland. All three installations are to come online in 2005, and the locations were chosen with more in mind: wages are low in Eastern Europe, both countries will be joining the European Union soon, and Toyota sees the potential for new markets all the way to Russia.
"Suzuki has a long history in Hungary, and Isuzu builds engines in Poland," said Shinji Kanno, who represents the Japan Automobile Manufacturers Association in Brussels. "It's totally up to the market to see how much we can expand our business in Eastern Europe. The more positive it is, the more our investment will increase in that region."
Consumer attitudes are also shifting Japanese makers' way. For generations, Europeans, more than many Americans, remained strong brand and national loyalists. French drivers liked to stick with Renault, Germans with Volkswagen, Italians with Fiat. But with growing affluence and the financial means to change cars more often, brand loyalty is breaking down. Moreover, all manufacturers are developing cars meant for a Europewide market to capture economies of scale.
"In France, you kept your car 20 years, and brand loyalty reigned strong, especially among Citroën owners," said Jerome Chastel, commercial director at Christophe Briard Automobiles, a big Toyota dealership in Paris. "Now the market is more volatile. It has to be a coup de coeur" ? a love affair.
Jacob Cohen is one who fell in love. Mr. Cohen, 48, who sells children's clothing, has been driving a Volkswagen Golf lately, but he has admired Japanese quality since he bought a Nissan van a few years ago for his business. Now, with three growing children, he wants to replace the Golf with a larger vehicle, and on a recent afternoon he examined a steel-gray Toyota Avensis Verso at Mr. Chastel's showroom. "I saw one in the street and liked its looks," he said. And at 27,850 euros ($31,615), it is cheaper than a comparable Volkswagen model, the Touran.
European automakers, of course, are gearing up to meet the challenge. Some are forging alliances. Peugeot, which prides itself on internal growth and so sat out the round of mergers and acquisitions that swept the industry a few years ago, chose Toyota as a partner to share the cost of developing and building its new small car. Peugeot's rival Renault went a step further a few years ago by buying a controlling stake in Nissan.
Now, Renault counts on Nissan for profits and expertise. At the big Renault plant in Douai, half an hour's drive from Valenciennes, the use of Nissan production tools and assembly methods have helped cut the cost of building a four-door Renault Mégane by 13 percent and speed up the assembly time to 14 hours, from nearly 26 hours in 1995.
Pierre-Alain De Smedt, Renault's production chief, calculated recently that Nissan was responsible for about two-thirds of the plant's design. About half its 6,000 workers attended courses taught by Japanese instructors on how to increase productivity.
Mr. Ludvigsen, the consultant, said that perhaps the toughest challenge facing the Japanese in Europe is not cost-cutting, but distribution: assembling an effective network of dealers.
European Union regulations traditionally gave car manufacturers strong control over their dealers, which in many countries were virtual monopolies that blocked the entry of new competitors. But recent regulatory changes meant to loosen the system are likely to ease the way for the Japanese manufacturers, who need more dealers if they are to realize their growth plans, Mr. Ludvigsen said.
Even under the new rules, Mr. Kanno of the Japanese manufacturers' association said, "It won't be easy; it's a tough market."
Breaking Habits, Europeans Turn to Japan's Cars
By JOHN TAGLIABUE
ALENCIENNES, France ? When the 5,000-ton presses at Toyota's big new plant outside this northern French industrial city slam down, the concrete floor under Toshiharu Takasu's feet trembles.
For decades, varying national tastes, trade barriers and the inclination of many European automakers toward creative design made most of Europe inhospitable terrain for Japanese cars in contrast to the United States. But now, the pounding presses at the Toyota plant are a kind of metaphor for a recent Japanese automotive assault on the Continent.
To the delight of managers like Mr. Takasu, the plant manager here, but to the dismay of French, German and Italian auto executives struggling with moribund sales, more European buyers are deserting their Fiats and Volkswagens in favor of Toyotas, Nissans and Hondas.
Many of the hot-selling Japanese models have been designed and engineered specifically for Europe, and fall in the small and midsize segments that account for the bulk of European sales. But buyers are also attracted to larger Japanese models.
Sales of Japanese cars in Europe jumped almost 7 percent last year, to 1.64 million vehicles, while the overall car market contracted 3 percent. In the first half of 2003, as the market shrank 2.6 percent further, Japanese car sales climbed by an additional 6 percent.
Still, only about one new car in eight sold in Europe is a Japanese model, up modestly from the one-in-nine share that held steady for a decade. In the United States, the Japanese manufacturers have 28 percent of the market.
Fresh models are behind the recent Japanese growth, most of this in the compact category, the largest in Europe: the Honda Jazz, the Mazda 2, the updated Nissan Micra and the redesigned Toyota Yaris ? known in Japan as the Vitz and built here in Valenciennes, near the Belgian border. With more new models in preparation and new factories planned or under construction in several countries, Europeans' flirtation with Japanese cars is expected to continue.
The sprawling Toyota plant here illustrates the promise. It was built for $570 million and opened in January 2001, with plans for an annual output of 150,000 cars. But by last year, the demand for the Yaris was so strong that production was ratcheted up to 184,000 annually. A further $100 million in investment will step up capacity to 240,000 cars next year.
"This is really quite good," said Mr. Takasu as he gazed at charts tracing the rising output and the swelling bonuses that his employees will receive for surpassing targets.
What made the difference in Europe for the Japanese auto industry was a benign combination of lowered barriers to Asian imports, evolving European habits in car purchasing, and the automakers' decisions to start replacing imported models with new ones designed locally.
Now, in markets like France and Italy that long resisted Japanese cars, "people are realizing they're not turkeys," said Karl E. Ludvigsen, a former Ford executive who is an independent consultant in Britain. It is beginning, he said, "to be socially acceptable to have one in the driveway."
For decades, European drivers saw Japanese cars as reliable and robust perhaps, yet bland and lacking in personality. The Japanese companies are starting to overcome that reputation by tailoring their new models to European tastes. The Micra, for instance, came out of Nissan's new design center in London; Toyota's latest incarnations were created at a design center it opened in Provence, in southern France, in 2000.
The European Union still levies a 10 percent duty on cars imported from Japan, four times the duty that Washington assesses. So all the big manufacturers now build cars in European Union countries. Honda has factories in Britain; Nissan, there and in Spain. It said recently that it would spend 400 million euros ? $454 million at current exchange rates ? to expand the production of sport utility vehicles at a factory in Madrid and diesel engines in Barcelona, in hopes of selling 20 percent more vehicles in Europe over the next two years.
Toyota and Peugeot broke ground recently on a $1.5 billion joint factory in the Czech Republic to build very small cars for city use, and Toyota is adding a transmission factory and an engine plant in southern Poland. All three installations are to come online in 2005, and the locations were chosen with more in mind: wages are low in Eastern Europe, both countries will be joining the European Union soon, and Toyota sees the potential for new markets all the way to Russia.
"Suzuki has a long history in Hungary, and Isuzu builds engines in Poland," said Shinji Kanno, who represents the Japan Automobile Manufacturers Association in Brussels. "It's totally up to the market to see how much we can expand our business in Eastern Europe. The more positive it is, the more our investment will increase in that region."
Consumer attitudes are also shifting Japanese makers' way. For generations, Europeans, more than many Americans, remained strong brand and national loyalists. French drivers liked to stick with Renault, Germans with Volkswagen, Italians with Fiat. But with growing affluence and the financial means to change cars more often, brand loyalty is breaking down. Moreover, all manufacturers are developing cars meant for a Europewide market to capture economies of scale.
"In France, you kept your car 20 years, and brand loyalty reigned strong, especially among Citroën owners," said Jerome Chastel, commercial director at Christophe Briard Automobiles, a big Toyota dealership in Paris. "Now the market is more volatile. It has to be a coup de coeur" ? a love affair.
Jacob Cohen is one who fell in love. Mr. Cohen, 48, who sells children's clothing, has been driving a Volkswagen Golf lately, but he has admired Japanese quality since he bought a Nissan van a few years ago for his business. Now, with three growing children, he wants to replace the Golf with a larger vehicle, and on a recent afternoon he examined a steel-gray Toyota Avensis Verso at Mr. Chastel's showroom. "I saw one in the street and liked its looks," he said. And at 27,850 euros ($31,615), it is cheaper than a comparable Volkswagen model, the Touran.
European automakers, of course, are gearing up to meet the challenge. Some are forging alliances. Peugeot, which prides itself on internal growth and so sat out the round of mergers and acquisitions that swept the industry a few years ago, chose Toyota as a partner to share the cost of developing and building its new small car. Peugeot's rival Renault went a step further a few years ago by buying a controlling stake in Nissan.
Now, Renault counts on Nissan for profits and expertise. At the big Renault plant in Douai, half an hour's drive from Valenciennes, the use of Nissan production tools and assembly methods have helped cut the cost of building a four-door Renault Mégane by 13 percent and speed up the assembly time to 14 hours, from nearly 26 hours in 1995.
Pierre-Alain De Smedt, Renault's production chief, calculated recently that Nissan was responsible for about two-thirds of the plant's design. About half its 6,000 workers attended courses taught by Japanese instructors on how to increase productivity.
Mr. Ludvigsen, the consultant, said that perhaps the toughest challenge facing the Japanese in Europe is not cost-cutting, but distribution: assembling an effective network of dealers.
European Union regulations traditionally gave car manufacturers strong control over their dealers, which in many countries were virtual monopolies that blocked the entry of new competitors. But recent regulatory changes meant to loosen the system are likely to ease the way for the Japanese manufacturers, who need more dealers if they are to realize their growth plans, Mr. Ludvigsen said.
Even under the new rules, Mr. Kanno of the Japanese manufacturers' association said, "It won't be easy; it's a tough market."
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