U.S. Cars Muscle In
Beth Hughes, of the Examiner Staff
May 20, 1990
TOKYO—These days lanky Jim Steinhagen spends his time between
car dealer heaven and hell.
Extensive market research for his company, General Motors, indicated
its new Pontiac Grand Am stood a good chance of succeeding in the
tough Japanese market.
So Steinhagen, GM's director of North American vehicle sales, packed
a red car and a black one off to a Japanese photographer specializing
in automotive work. He got back two posters, a black car on a red
background and a red car on a black background.
The cars looked futuristic and fast, sleek and sexy. The posters
sang a subliminal song so compelling — "drive away from
the cares of this life" — that jaded Tokyo subway riders
did double takes passing the ads, which screamed out the slogan
Now, for love or money, you flat out cannot buy a Grand Am in Japan.
At just over $18,000 each ($5,000 more than in the Bay Area), fully
equipped, all are sold. Steinhagen, barely able to contain a grin,
refuses to say how many "all" was. He says there's a waiting
list for the next shipment.
Even Posters are Collectibles
The posters are becoming collectors' items, too.
The sell-out is even sweeter for having occurred in Japan's tough
but alluring market, one filled with discriminating consumers like
Tokyo office worker Eiko Sato. At 51, she equates American cars
with her youth.
With a slight blush, she recalls riding through the glitzy Ginza
shopping district in a Buick as big as a house on the first day
of her first job.
With a wistful, almost sad look, Sato gazed across six lanes of
bumper-to-bumper traffic and asked: "Why are there no American
cars? I don't see them anymore. Do they still make them?"
American manufacturers, confronted with the fact that a Japanese
product, the Honda Accord sedan, is the top-selling automobile in
their country, say they not only are still in business, but hope
to sell more in Japan.
The Japan Automobile Importers Association predicts that the import
market will continue to expand. It says 1990 sales will bring imports
up to 5.71 percent of Japan's registered automobiles.
It's all part of a baffling increase in demand for cars. The number
of new ones sold in Japan exceeded 5.5 million in 1989, compared
with about 4.9 million three years earlier.
No one is quite sure why, considering there are only three parking
spaces for every 10 cars in Tokyo. But sales are soaring.
Can American car makers tap into Japan's car mania by appealing
to people unable to buy a house?
Can they overcome the Japanese perception that American cars are
huge, unsafe, gas-guzzling roadhogs driven only by gangsters?
Perhaps. But as American automakers make inroads, Japanese buyers
are stating their preference for European cars, especially those
with the big Bs on the nameplate. Like the Mercedes-Benz (referred
to here as a Benz) or a BMW (known as a "Roppongi Celica,"
a term that carries the same implicit put-down as "Boring Marin
Yet, Steinhagen's current dilemma of having sold so many cars he
has none left to sell may mark a turning point in American car sales
in Japan, the world's third-largest automotive market after the
United States and Europe, and its fastest growing imported-car market.
Signs suggest that consumer attitudes are changing. For instance,
most Japanese consumers concede that gangsters now drive large black
Mercedes with gold trim.
The current issue of Popeye, a popular magazine for young men,
reviewed the Grand Prix and dubbed it a "Hot New Car,"
while praising the handling, design and engineering. The reviewer
said that even though it looked smaller than what was expected of
an American car, it was still big inside.
Import Market Explained
The same issue touted the Jeep Cherokee as the car to drive for
the guy into outdoor sports and pushed Ford pickups as the final
accessory for drivers.
A report in the Journal of Japanese Trade and Industry predicts
a big rise in sales of imported cars by mid-decade.
It attributes the growth to diversification of consumer taste,
young people's demand for foreign cars, greater interest in the
Japanese market by foreign car makers willing to tailor their products
to local specifications, reduced prices and lower auto loan interest
Imports are also becoming more of a bargain as Japanese cars become
more luxurious and therefore more costly.
Another major factor will be last April's change in Japan's tax
laws, eliminating a whopping surcharge on cars with engines larger
than 2,000 cubic centimeters.
While this means better market access for the big Mercedes and BMWs
beloved by bureaucrats and managers, it also opens the door wider
for American cars.
What Businessmen Want
In fiscal year 1989, Japanese consumers bought 203,010 imported
cars, an increase of 42.5 percent over the previous year.
The jump prompted Japan's automotive industry newspaper to conduct
an exhaustive survey, tracking the increase and consumer preferences.
Sixty percent of the 1,000 businessmen surveyed selected BMW, Mercedes
and Audi as their top three preferred imports. No American car made
the Top Ten list, which also included Volvos, Saabs and Citroens.
When the businessmen were asked to rank auto companies, Ford and
GM ranked ninth and 10th among non-Japanese companies.
Despite the survey's bleak findings, GM's increasing market share
is just the latest in a string of turnarounds by American carmakers
here. The company sold 7,200 cars in 1989, and 4,800 cars in 1988.
The figures pale, though, alongside those posted by West German
car makers. In 1989, West German automakers sold 134,594 cars, while
all American companies combined sold 19,950.
Skepticism Over Future
Analysts remain doubtful about the significance of the Grand Am
sell-out and the overall impact of U.S. cars on the Japanese market.
"Is GM going to spend serious money here promoting their products
and developing a market?" asked an American auto industry analyst
in Tokyo. "I'm skeptical. They're sending more people in here
but they're being very, very cautious. It takes a lot of commitment
to do anything in this market."
Steinhagen said 11 people will be added to the Tokyo office by
year's end, and that GM for the first time is augmenting the undisclosed
advertising budget of Yanase, its primary dealer network in Japan.
GM is also equipping cars destined for Japan on their Lansing, Mich.,
assembly line so that modifications required for this market will
no longer be made on the Yokahama docks.
Neal Doying with Baring Securities in Tokyo cautioned: “Imports,
especially from the United States, are still a small percent of
the total market here, so the growth is from a small base."
And everyone agrees that the big problem is changing Japanese consumers'
perception of American cars.
"American cars are seen as big and they have a terrible reputation
for quality," Doying said. "But the quality has improved
and they've been downsized in response to the (American) market."
Eighteen months of market research, direct mail promotion and showing
the cars in popular Tokyo shopping districts has Steinhagen convinced
that Japanese consumers have a false impression of American cars.
"They think of them as they were in the '70s. They'll tell
you American cars are too big, they use too much gas, they're high-priced,
poor quality, the steering wheel's on the wrong side and that they
have a gangster image.
"Then we showed them new American cars which have quality,
are fuel efficient and competitively priced. The response from some
was positive but others said, 'Oh no, no, no, please don't do that,
those aren't American cars.' "