10/22/07

Japan's Domestic Car Market Shrinks

Japanese car makers, already adept at critical global export marketing, now have additional motivation to sell outside their home islands.

Japan's domestic car market peaked in 1990 during the bubble economy. Remember when a square block in Tokyo was supposedly worth more than all the real estate in California?

The island nation is a demographic trend setter, its population has begun to decline and age.

Japan's graying demographic is a leading indicator for the rest of the world, the US is just a few years behind. Empty nesters downsize everything, especially houses and cars.

Overseas markets, where car sales are growing rapidly, are setting the agenda.

Toyota and Honda can't ignore the trends toward downsized world cars, which cannot be produced profitably in the high cost and mature US and European auto markets.

Nissan has announced a large-budget initiative to build small cars at much lower prices.

This trend bodes ill the US automakers still mired in the SUV/pickup marketing trap.

Chrysler is especially vulnerable.

With Japanese consumers leading the shift toward smaller cars, Japanese builders have an even bigger edge in world markets.