BUSINESS BLUNDERS
Why American Cars Fail in Japan
It turns out size does matter
Chances are, either you or one of your family members has at least one Japanese car.
What do Nissan, Toyota, Suzuki, Mitsubishi, and Honda have in common? They’re all Japanese brands, and they sell really well all around the world.
Even in the United States, Japanese companies have a huge chunk of the market under their control. For example, Ford owns 14.1% of the car market, whereas Toyota, a Japanese company, owns 14% — which is almost the same.
On the other hand, Ford had to leave Japan in 2016 because of a “weak market share.”
So why are Japanese cars doing so well and American cars aren’t? Just so you know, a high tariff is not one of the reasons.
In fact, Japanese companies have to pay tariffs to import cars into the U.S., but the Japanese government is kind enough to not charge any such tariff for American companies importing cars into Japan.
As you can probably guess, there’s a lot more going behind the scenes. So let’s understand why American cars fail in the land of the rising sun.
Size Matters
If you look it up on YouTube, you’ll easily find one of those videos from Japan where the train station staff has to literally push people into a train to close the door. Crowdedness is a big issue in some Japanese cities to this day.
Of course, the people who can manage to drive a car can escape this daily ordeal, but navigating their way through jam-packed Tokyo roads is still a challenge.
The solution to this problem is something called Kei cars. These cars are manufactured in Japan and are compact enough to easily fit into a carpark, yet safe enough to be run on highways.
As compared to big, muscly American cars, these smaller cars adapt to the populated Japanese environment easily.
The Japanese Customers Don’t Just Buy Whatever’s Available
Unlike most dealerships in the West where buyers have to purchase a car as it is, the Japanese customers have the liberty to customize their cars.
The Japanese car buyers aren’t a big fan of buying whatever is given to them. They’d rather design their own unique car, give the design to the dealer, and then the dealer will get it manufactured for them.
It might take the dealer a while, usually a few weeks, to design a custom car for a buyer. But hey, if they get to control how their car looks from the inside as well as outside and how much power the engine has, it’s worth the wait.
On the other hand, American car companies aren’t willing to offer such a luxury to their Japanese customers.
Not adjusting to the local market is one of the reasons why Starbucks failed in Australia and Israel, Walmart Failed in Germany, McDonald’s failed in Vietnam, and KFC failed in Israel.
Customer Experience Does Matter
Visiting car dealerships in most Western countries can be a daunting task. When I visited a car dealership here in New Zealand, the dealers didn’t want me to walk out until I bought a car.
I said, “I’ll think about it and talk to you tomorrow.” And they said things like: “OK, how about you pay $500 to lock down the car and pay the rest tomorrow”; “Wait, we can offer low-interest finance”; “The prices are going to increase tomorrow because there’s termite in the woods.”
I’m not kidding, I thought they might kidnap me or seek revenge for not buying from them. I was so annoyed after this incident that I had to call my flatmate. He said, “It’s normal. We all have to go through this when we buy a car.”
Well, not in Japan. The Japanese dealers offer a rather elegant and non-needy car-buying experience to their customers. The relationship between car dealers and buyers is more than just money. There’s a spirit of hospitality and care involved, and the Japanese customers would rather not go through the difficulty that buyers in the West have to go through.
American Cars Don’t Have Much of a Reputation in Japan
“The biggest challenge faced by American auto brands in Japan is an outdated perception of quality…The fit and finish is wrong, they guzzle gas and the cars are too big for the streets.” — Hans Greimel, Automotive News
The perception of a brand is very crucial when it comes to making a buying decision. For example, McDonald’s is perceived as unhealthy, even though they sell salads these days. A health-conscious person wouldn’t even step into McDonald’s because of this negative perception.
Similarly, American car brands have a reputation for manufacturing needlessly big, fuel-burning cars that break down within a few years. Perceptions take a long time to change — years, sometimes decades. And sometimes, they never change.
Conclusion
Apparently, the only way American cars can survive in Japan is by joining hands with Japanese companies or at least hiring local car experts to help them navigate their way through the Japanese market.
Everything from customization to customer experience is important to Japanese car buyers, and so the American car sellers are going to have to change a lot of aspects to succeed in this Far-Eastern nation.
Do you prefer American cars or Japanese cars? Let me know in the responses.
