Hey there, time traveller!
This article was published 7/2/2013 (1505 days ago), so information in it may no longer be current.
Japanese automakers are building new North American assembly plants at a breakneck pace to regain lost U.S. market share and reduce their dependence on a homeland that's become prohibitively costly.
Japan's dwindling work force and seemingly endless recession provide more reasons for automakers to move work offshore.
"Five years ago, nobody expected this kind of manufacturing shift to North America," said Haig Stoddard, WardsAuto analyst. "Replacement of Japanese imports with North American production is the main driver."
Hundreds of thousands more Japanese-brand vehicles will be built in North America by 2014. German automakers are also expanding in the U.S. and Mexico.
"I wouldn't be surprised to see some Japanese manufacturers virtually cease vehicle production in Japan" over the next several decades, said Jim Hall, managing director of 2953 Analytics.
WardsAuto forecasts at least 10 vehicles imported from overseas will go into production in North America by 2016. Several more all-new models will add to the production boom.
For North Americans, the likely results are:
-- Greater competition here as domestic sales rise and Europe and Japan stagnate.
-- Higher exports to the rest of the world from Japanese-owned plants in the U.S., Canada and Mexico.
"North America is a competitive manufacturing base," said Michelle Krebs, senior analyst at Edmunds.com. "It makes sense to build more cars here, especially when it's expensive to make them at home and U.S. sales will grow more than Japan."
Mexico has been the biggest beneficiary. Honda, Mazda and Nissan all plan to open new plants there in 2013 and 2014. A number of Japanese and German plants in the North America are also expanding.
"It's a feel-good story," said Rebecca Lindland of consultant IHS Automotive. "It speaks to U.S. competitiveness and reinforces the economic comeback here. The U.S. has also become friendlier to small cars. That makes North America a better base for exports to the rest of the world."
Japanese automakers are reducing exports from home because the strong yen has slashed profits on cars shipped from Japan to America. That's a major problem for small cars facing tough new competition from Korean and Detroit Three compacts and subcompacts.
"Japanese automakers are not able to charge premium prices for their small cars anymore," Krebs said. "Japan is a high-cost manufacturing base. Japanese automakers have to go to lower-cost production sites to offset their lost margins."
Mexico is a particularly attractive site for new small-car plants because it has rising sales, low wages and free-trade agreements with the Western hemisphere's biggest markets: the U.S. and Brazil. The potential downside is over-capacity if investment outstrips demand or Brazil limits imports from Mexico.
Japan has a demographic time bomb: Its work force is shrinking and aging.
"The decline in Japan's working-age population is stunning," Lindland said. "It's an aging population with no immigration. That's a deadly combination. It's important for a nation to build a society that welcomes and supports new manufacturing jobs."
It all fuels a long-term shift away from Japanese exports, Stoddard said.
"I wouldn't be surprised if Honda and Nissan build nearly 100 per cent of the vehicles they sell here in North America in a few years. Toyota's the only one that doesn't seem committed to that, but having Mazda build a subcompact for it in Mexico may be a way to test the waters."
Toyota builds about 70 per cent of the vehicles it sells in the U.S. in North America today.
While its automakers expand and build new factories in North America, Japan may have to figure out whether it can continue to be a manufacturing country.
"Statistically, the Japanese working class is disappearing," Hall said. "That's the main reason for all the new assembly plants. The automakers need workers and lower-cost production, and neither is available in Japan."