Ford to Japan: Drop Dead

Jim Motavalli

Jim Motavalli | Feb 03, 2016

In a memo leaked to Reuters last week, Ford revealed it would pull out of both Japan and Indonesia this year because it sees “no reasonable path to profitability.”

Japanese street traffic, with only five percent imports. But isn't that a Mercedes there? (Mariusz Kluzniak/Flickr) I’ve been to Japan several times in recent years, and—trust me on this—Ford vehicles are thin on the ground. Just as Japan is not exactly a melting pot of ethnic groups, it’s not much of a buyer of foreign cars. Ford Japan sold just 5,000 cars in 2015, which means it had 1.5 percent of a pretty small market. Only five percent of sales in Japan are imports.

Still, the Japanese market is the third largest in the world, behind the U.S. and China, and more than nine million cars find buyers annually. It’s not surprising that American companies want a piece of that, but it’s not likely to happen.

Jack Nerad, executive editorial director at Kelley Blue Book, tells me:

The typical Japanese car buyer is pre-disposed to buy a car from a Japanese manufacturer. This is essentially how the society works, and the mindset is reinforced by the way cars are sold in Japan, often by personal sales, some done door-to-door. This style of selling is alien to non-Japanese car companies and largely outside their areas of expertise. Well-off Japanese consumers do seek out international luxury brands—BMW, Mercedes-Benz—but the average Japanese car buyer has exhibited no serious desire to buy an imported vehicle.

General Motors actually does worse than Ford in that market. In 2013, the company said it had big plans to sell cars in the Land of the Rising Sun, even though its sales then stood at 1,000 Caddys and Chevys per year. A year later, sales “soared”…to 1,200. C’mon, GM, couldn’t you offer right-hand-drive over there? One Japanese dealer criticized GM’s “lack of effort.”

Tokyo in the rain--I didn't see any Fords. (Jim Motavalli photo)Automakers especially want to do well in Japan, because the European market has been such a bust lately. It’s not happening, even though they’re doing very well indeed in that other big Asian market—China. Buick, for instance, sold 919,582 cars in China last year, versus just 223,000 in the U.S. The division probably wouldn’t exist without Chinese sales.

“China has a different business model,” Nerad said. “A lot of foreign manufacturers have brands that sell well there, but a high proportion of those vehicles are built in China by Chinese factories in a co-venture.” That arrangement works well for both U.S. automakers and for their Chinese partners; it’s a pity the Japanese don’t adopt it.

Congestion in Japan is terrible, as are gas prices--small cars prevail. But they like Jeeps? (Hikosaemon/Flickr)Oddly enough, one American brand does well in Japan—Jeep. Even though Japanese companies are crazy about quality, and Consumer Reports routinely puts Jeep at the bottom in that category, the off-roaders sell over there.
Tom Cruise and Cameron Diaz on Tokyo TV: The Japanese are big consumers of western pop culture, but not our cars. (Jim Motavalli photo)Sales were about 8,000 in 2014, and 10,000 last year. My guess is that Jeeps are American icons for Japanese consumers, who also buy plenty of high-ticket classic cars, jazz records and western pop culture of all kinds. Jeep buyers probably like cars with left hand drive.
 

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