Thursday, January 19, 2006

The Japanese: Predictions for 2006

Toyota: As an American living in Europe, I am not used to seeing a powerful company like Toyota be an also-ran to not one, but many other companies. Quite simply Toyotas are not the best selling vehicles in the UK or Europe. They are respected and have a good reputation, but Europeans consider them boring. However, I think Toyota is bound for yet another great year in 2006. I think their European arm will not make a profit, if it ever has. But in America with vehicles like the upcoming FJ Cruiser, the new Camry, and the sales success of their hybrid line, Toyota will probably beat General Motors for the worldwide sales crown in 2006. This is a company that rarely makes mistakes. It has replaced the absurd Echo with the Yaris, a decent supermini. It has made a class leader in the FWD realm with its new Camry. And its Scion lineup is quite good. Lexus will continue to do well. If American consumer tastes ever go towards those of Europe, where handling and aesthetics are more important than reliability, expect Toyota to be in trouble. But that day has not arrived and may never. I'm not going to bet against this company.

Honda: Again, as an American who lives in Europe I am privy to seeing multinational corporations I am used to seeing be successful, struggle. Honda, like virtually all the Japanese car companies, has a troubled reputation in Europe. Their cars are considered bland and only good for old people. To combat this they have introduced an all new Civic in hatchback form. It is the most daring design to come out of a car company in years. I have yet to see one on the road in the UK, but did spot one in Spain while on holiday for New Year's. It is a stunning vehicle, and is a committed attempt by this company to make itself exciting. In America though I expect Honda to continue steaming ahead because of its introduction of the new Civic (different from the European version) for the US, and the new Honda Fit. Like Toyota, Honda has decided that oil prices will be high for the long term, and they have hedged their bets by introducing a small car that gets great mileage. Chrysler and Ford are nowhere to be found, and Chrysler has gone so far as to replace its Neon with a small SUV that will have worse mileage. Ford at least has the ability to import over its Fiesta, a competent small car. Actions like these make my hobby as an analyst quite easy. I expect Honda to do well in 2006.

Nissan: Nissan has a strong presence in Europe thanks to its partnership with Renault. The Nissan Micra is a best seller in the UK as well. But I do not expect Nissan to do well in overall in 2006. Why? They don't take gas prices seriously. Carlos Ghosn shows no interest in hybrids, and while I understand his argument that they are an expensive technology that does not produce a profit, he has offered no fuel efficient alternative for his customers. The new Sentra is not really competitive with the offerings from Toyota or Honda. Infiniti is doing somewhat well, but the G35 is in need of replacement. The company has been too aggressive with large SUVs and pickups and has failed to realise that this is an area that the Big 3 will always dominate, and it is a market segment that is on the wane because of gas prices. In many ways Nissan is an American car company with Japanese designers and engineers. By not offering fuel efficient vehicles, or competent small cars, this company stands to suffer in 2006. The fact that many of its pickups built in Mississippi were built poorly because of an incompetent rural workforce didn't help matters. They are bringing over the small Verso, and that may stem the tide, but this company needs to be focus more on fuel efficiency and less on emulating highly flawed companies like GM and Ford.

Mazda: Until I came to the UK, Mazda was my favorite company. Their emphasis on design, sportiness, and experimentation attracted me. The company continues these trends, but there are problems. While their new CUV looks great, it still remains a vehicle that does not get great mileage. Their new Miata (MX-5) to me doesn't compete in the looks department, especially when compared with the Pontiac Solstice. It might handle better, but the design is simply too Japanese for American tastes. Sales figures reflect this. The 3 and 6 will continue to do well, but where is a small car below these two vehicles in size? I have seen the Mazda 2 over here, and it is a disappointment. Mazda needs to make a small supermini with a sporty attitude. Because of its "sport" nature, it may be able to weather gas crises more strongly than its competitors. I think it will perform adequately in 2006.

Mitsubishi: Here is a company in dire straits. Mitsubishi is a company that decided to try and emulate the Big 3 with a series of poorly made SUVs and didn't have the dealership network, nor the brand cache behind it to pull off such a stunt. The result has been disaster. Its subsequent embrace of cars has helped somewhat. The Eclipse is a good looking vehicle, but what next? Mitsubishi should attempt to bring over its small car lineup from Europe. They also need a competent FWD midsize car. Unless something dramatic happens I can't see this company remaining for too much longer in the US. I don't see good things in 2006 for Mitsubishi.

Suzuki: Suzuki builds one of the most competent and stylish superminis in the Swift, but its a vehicle most Americans will never see. They should bring it over to the US. This is a company most Americans see as specialising in small car based SUVs. It needs to change that reputation, especially as it is quite able to do so based on its European and Japanese lineup. The SUVs it makes are good, but its attempts at making a small sedan are dismal. I think it will perform adequately in 2006.

Subaru: I am not a fan of this company's new design emphasis. I think their cars have always been rather ugly, but now they are godawful. However, time and again they have proven my maxim that aesthetics are everything wrong. Will it continue? AWD cars are not fuel efficient. Gas price increases will hurt this company. Subaru has recently become a part of the Toyota empire, so I expect to see something good in the small car department. I think 2006 won't be a great year for them, but 2007 probably will be a bit better now that Toyota is running the show.

And that's about it. I ignored some of the lesser players, like Isuzu, who I think will finally die in 2006 at some point. I plan on talking a little about my trip to Spain, and viewing a country that is very dependent on motorcycles and scooters for the first time. I see a big future for motorcycle and scooter manufacturers, especially if fuel prices continue to rise. The entire Southwest United States uses far too many cars for the weather it has. If I had a few spare dimes I'd plunk it into some motorcycle company stock. Harley's looking better every day.

Suzuki is trying to change their image by importing the Lacetti saloon and hatchback from GM Europe (GM DAT), as well as the GM Daewoo Magnus. They also sell the hatch and saloon versions of the Liana (sold as the "Aerio" in the US, as if they think we couldn't deal with a name like Liana), though now that the SX4 is being released/built, the Liana may go the way of the dodo bird in the US at least, don't know about Canada. A Swift would be nice again, and I cannot fathom as to why they're not bringing it over, other than emmisions and/or safety regs.

Rick, blaming Nissan's truck problems on "incompetatnt rural workforce" seems a little bigoted.

What about the japanese plants in Louisiana, South Carolina and Texas that build cars and trucks? The quality doesn't seem to be an issue with vehicles built there. These are all "rural" locations. Do you just not like Mississipi? Couldn't the problme be design? Which by the way, most are designed in California, not Japan. Rural does not equal unqualififed or incompetant. And Japanese does not automatically mean the gold standard.

I usually respect your veiws, even if I don't agree, but this is just an elitist shot across the bow of middle america. If Nissan has quality issues with their vehicles, management should go through the process and see where the failings are. I very much doubt it's the rural workforce.

Another example of an elitist ex-pat American joining the Anti-USA choir. I'm sorry if my words seem harsh, I'm not even from a rural area, I'm a native New Yorker, a city boy, but it just hits a nerve.

I've always found it interesting, the UK's resistance to japanese vehicles, with the exception of Nissan and of course Honda designed Rovers. And the rest of your post is as usual interesting and well written.
Big Ford Fan--Several articles have blamed the shoddy working coming out of Mississippi on the workers, at least from the main stream press. This may have been planted by Nissan to lay the blame away from their own engineers. I only use what I read. I don't work there, so don't take offense. Regardless it is a problem for Nissan.

As for joining the anti-US choir, I'm not anti-US at all, but just find that they are a nation filled with problems. The vast majority of the rest of the world sees this as well. Are they all insane, and America right? I think it would help you to read foreign newspapers to get different viewpoints, or perhaps learn a foreign language or two.
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