Yen soars Japanese car industry to shift Chinese parts companies

The appreciation of the yen has caused Japanese car makers to say that they can't eat too much. Following Toyota and Nissan, Japan’s Mitsubishi Motors, which is preparing a joint venture with GAC Group, has issued similar plans for its mid-term business plan (FY 2011-2013). Mitsubishi’s plan announced a drastic reduction in local procurement costs for parts and components, and launched “global small car” products in emerging markets such as China to cope with the appreciation of the yen.

According to the Mitsubishi Motors' plan, Mitsubishi Motors' production ratio in overseas markets will increase from the current 44% to 54% by 2013. Mitsubishi Motors also said it will significantly reduce its procurement costs, which is a reduction of 90 billion yen during the planned period, including the purchase of more parts and components outside Japan to hedge against the yen's appreciation.

Mitsubishi Motors also highlighted that the locomotives that will drive the growth of the company will be in markets such as China, Southeast Asia, Russia, and Brazil. In the next three years, through the launch of new products including the “Global Compact Cars”, it is hoped that the sales volume of the above-mentioned emerging markets will reach 280,000 units. The reporter learned that this small car is planned to be produced in the third plant of Mitsubishi Thailand as soon as possible in March 2012. If the joint venture with Guangzhou Automobile is successful, the Changsha base will also be introduced into China.

Analysis: China's previous undertaking of the Japanese industrial transfer has appreciated by more than 10% against the U.S. dollar last year. This has caused Japan's export profits to plummet from Japan, but it has brought China the opportunity to undertake industrial transfer. Some cars that would not have been considered for production outside the homeland may be imported into production, and capacity investment in China will also increase.

The CEO of the Renault-Nissan Alliance, Ghosn, said earlier that it plans to focus its production functions on dollar-linked economies, including the United States and China, so as not to expand production in Japan in the face of exchange rate fluctuations. Nissan has recently been "strategically transferred." Since last year, March has been introduced into China. “China's factories are becoming increasingly important in Nissan’s global capacity building.” Ren Yong, deputy general manager of Dongfeng Nissan, told the newspaper: This means that localization of related products will increase the intensity of manufacturing in China to further reduce costs. As for whether Nissan high-end brands will soon be transferred to Huadu, he said that the related business plan is still being discussed, but it is only a matter of time before Dongfeng Nissan has products in important market segments.

The appreciation of the yen may also bring matching opportunities to Chinese parts and components. Zeng Qinghong, general manager of GAC Group, said that 70% to 80% of the cost of a car is a component. It is reported that the Japanese auto industry has always been "clustered". Unlike European and American parts procurement bidding, Japanese auto parts and parts companies are often strategic alliances, and there is no way for outsiders to enter.