Media post: It’s Not Just Trade Policy

Why aren’t American cars more popular in Japan? If you believe that the answer to this evolves around trade policy and tariffs, you’d only partially be right. The real answer is more complex and involves several factors. In this article, we will look a few of the things that have made it difficult for American car manufacturers to penetrate the Japanese market.

Trade policy

Yes, there is some trade policy that affects American car sales in Japan. Earlier this year, Japanese Prime Minister Shinzo Abe visited the U.S. During that visit, President Trump said that the Japanese “make it impossible to sell cars in Japan.” This is also the line being touted by American carmakers, which accuse Japan of automotive protectionist policies. Well, there is some truth to this. Perhaps the most significant issue is that there is a law that prevents existing domestic car dealers from selling foreign cars. This makes it necessary for any manufacturer that wants to sell in Japan to build an enormous dealer network. For obvious reasons, this puts a damper on the efforts of any manufacturer that wishes to penetrate the Japanese market.

Strong relationships

Japan’s entire car sales model is different than that of the rest of the world. In Japan, car dealers build very strong relationships with their customers. It might be similar to the relationship you and I have with a local merchant, a merchant that you genuinely enjoy seeing and doing business with.

For example, when a Japanese dealer knows a potential customer is interested in a new car, they go to work. After several phone conversations and much information gathering, dealers typically bring several cars right to the customer’s home for evaluation. The customer then inspects, test drives and looks over the cars before deciding if one meets their needs.  All the negotiation and paperwork is done wherever the customer pleases, often on a kitchen table. When done, the dealer arranges insurance and registration.

After purchase, the dealer continues the relationship by staying in touch with the customer. This may be by offering free car washes, promotional products and even informal meals, back at the dealership. It is important to understand that this is not an arms-length relationship; the car dealer and staff get to know the customers immediate family, extended family, and even everyone’s birthdays.

Conditioned to buy

There are also some historical reasons that make it hard for U.S. automakers to sell cars in Japan. It has to do with the way that Japanese citizens view other car manufacturers. Our subject matter consultant at Selma Chrysler of Selma, CA, explained that after World War II, all the foreign car manufacturers were forced to leave Japan. As the Japanese economy strengthened, all the domestic brands competed with each other and, as a result, grew better and better in terms of quality and design. By the time Japan opened its market in the 1970s to other makes, the Japanese people were accustomed to buying only domestic cars; cars that offered excellent reliability and were fine-tuned to Japanese tastes. Because of this bias, efforts to sell foreign automobiles has been difficult.

In summary

Its all too easy to state that the reason more American cars aren’t bought by the Japanese is due to simple trade policy and tariffs. After analysis, it turns out that the situation is more complex and needs to be addressed on multiple levels.