Consumers: Expect to Pay More for a New Japanese Car

- Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book

Consumers should prepare to pay more for vehicles produced in Japan, with the Japanese Yen expected to remain elevated for the foreseeable future.  The strengthening Yen has prompted Honda, Toyota and Nissan to reduce the number of vehicles headed to the United States to combat losses on the exchange. 

For the first time, Honda recently admitted that sales in the United States of the fuel-efficient Fit, Insight and other vehicles produced in Japan were generating a net loss, prompting the automaker to reduce the inventory of some models being shipped across the Pacific.  Although exports will be managed to limit losses, Japanese manufacturers will continue to do whatever is necessary to maintain share in the United States.  As exports decline, dealers will have less inventory, driving up prices for consumers.  As an example, consumers are paying 97 percent of sticker on an all new Honda Fit, slightly more expensive than the subcompact segment average of 95.5 percent of MSRP. 

Sales of Japanese Exports on the Decline

Sales of vehicles produced in Japan have taken a significant dip since 2007 when the Yen began it’s current ascent.  Although sales of Japanese exports soared in 2008 due to a rise in fuel prices, it has been declining steadily since that time.  In 2008, vehicles produced in Japan accounted for 15 percent of all sales in the United States, while through the first five months of 2012 that number has dwindled down to 11.6 percent.  Japanese exports remain above the 10 percent share that was the norm from 2000 to 2005; however, fuel was cheap and small vehicles were not in high demand during that time so it isn’t exactly an apples to apples comparison.  Small cars will remain a priority for consumers as gas prices are expected to continue to rise in the years to come.  If the Japanese want to maintain their leadership position in these segments, they will need to increase production in the U.S. to ensure that they can compete on price, a process that could take several years to implement.