Why Japan Buys So Few American Cars

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Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.

1st Gear: Japan’s Unique Dealership Model Is Hard For Outsiders To Get

It’s all too easy to look at sales numbers or trade deficits and grumble that Japan is pushing their cars on us and not buying any of ours. The United States had a $68.9 billion trade deficit with Japan last year, $52.6 billion of which is from vehicles and parts alone! Scary numbers! Bad!


But the reason why Japanese cars make up 90 percent of the Japanese domestic market is substantially more complicated, as The Atlantic explains in their deep dive into the international trade of automobiles. For one, Japan’s entire sales model is completely different than the rest of the world. The Atlantic writes:

The last time Shujiro Urata wanted to buy a new car in Japan, his phone happened to ring. It was the local Toyota dealer on the phone, asking him if he was thinking about buying a new car. When he replied in the affirmative, the dealer and a coworker showed up at Urata’s doorstep an hour later with two demo cars, which Urata and his wife test-drove around the neighborhood. The Uratas decided to buy a car from the dealer. The dealer also handles their car insurance, coming to their home whenever the insurance contract needed to be renewed. The Uratas bring in their car to the dealer every few weeks for a free car wash, where they hang out and talk to the employees, who have become their friends, about dog breeds and family birthdays.


Dealers really are your friends in Japan—you know, as opposed to some schmuck pretending to be your friend in hopes that you’ll sign up for a bunch of unnecessary twaddle he’d like to tack on to your purchase. In Japan, that extra maintenance package Schmuck’s Auto Sales loves to push is probably even free thanks to their dealership model.

Japanese customers have gotten used to this extra hospitality, which has allowed Japan’s home-grown automakers stay ahead despite Japan backing off from most of its highly protectionist policies starting in the 1970s.


However, American automakers have been reluctant to sell cars in Japan the way Japanese consumers want to buy them, The Atlantic notes. Dealership networks aren’t as strong for foreign cars in Japan, and Ford even pulled out of Japan entirely.

The Big Three in America don’t have anywhere near the market share in America as the Japanese marques enjoy in Japan. This, of course, also contributes to the trade imbalance we have with Japan. Just remember: the numbers aren’t the full story. You have to give consumers what they want, first and foremost—otherwise, your cars just won’t sell.


2nd Gear: If You Can’t Beat ‘Em, Join ‘Em

Clearly, Uber and Lyft’s model of making themselves easily available via an app works—and now cab companies want in on that cash cow. Companies that once fought against the regulatory changes that allowed the ride-hailing apps to operate legally are now using those changes to their advantage, as Automotive News notes:

Pittsburgh Yellow Cab, for example, rebranded itself last year as zTrip. A century-old fixture in Steel City, it launched an app and offered a hybrid of services: accepting cash along with credit cards, letting rides be hailed from a corner or scheduled online and forgoing Uber’s controversial surge pricing during peak periods.


Cab companies, of course, resisted the ride-hailing apps as the apps weren’t subject to the same (and sometimes onerous) regulations. By adopting Uber and Lyft’s business model, cab companies are now jumping through those same regulatory hoops to get more cabs on the road and meet customer demand better, as Automotive News writes:

The owners of C&H Taxi in Charleston, West Virginia, thought about letting drivers use their own cars back in the 1980s, when MTV and Pac-Man were cultural crazes and long before smartphones and apps were on the radar. There was only one problem — it was illegal.

“We were never allowed to,” said C&H owner Jeb Corey. “So when Uber started lobbying the legislature to offer their version of service here in West Virginia, it basically gave us the potential to do those things now.”


Of course, ride-hailing apps are now subject to more regulation than they were when they started, with 43 states passing laws to define and regulate theses “transportation network companies,” or TNCs, like Uber and Lyft. It all comes full circle in the end.

3rd Gear: The Fourth Circle Of Production Hell Is Buying A Supplier

Tesla chief Elon Musk blamed automation issues for its slower than expected build of the Model 3—which is projected to be the bread and butter of Tesla’s profits, if they can ever figure out how to make it a bit faster. So, they went ahead and bought automation supplier Perbix, Bloomberg reports.


Perbix has supplied Tesla with automated machines for nearly three years now, but it’s clear that Tesla wasn’t happy with how they’ve been performing, as Bloomberg writes:

“With Model 3, either the machine works, or it doesn’t, or it’s limping along and we get short quite severely on output,” Musk said on an earnings callwith analysts last week. By contrast, with the Model S sedan or Model X sport utility vehicle, “because a lot less of it was automated, we could scale up labor hours and achieve a high level of production.”


“These other production lines don’t suck because your company had less to do with them” is pretty stern criticism from E-dog there.

Tesla only completed 260 Model 3 sedans in the third quarter, falling far behind its 1,500-car forecast.


Will buying a supplier that sounds like it was underperforming actually help dig Tesla out of “production hell?” We’ll see.

Terms of the deal were not disclosed, however, regulatory filings cited by Bloomberg show that Perbix president James Dudley is set to receive around $10.5 million in Tesla stock.


4th Gear: Mitsubishi Is Actually Doing It

While their current line-up may not be the most impressive, Mitsubishi is doing the unthinkable: making a profit, reports Automotive News. Granted, they had a hole to dig themselves out of after they got busted cheating their fuel economy numbers, however, they’re actually doing it. Profiting! As a company!


Favorable exchange rates and cost cuts have helped Mitsubishi post an operating profit of $207.3 million last quarter, a sharp contrast with this time last year, when they were forced to stop selling some of their fuel-cheatin’ kei cars and ended up losing $31.7 million for the quarter.

For the first time since Nissan bought a controlling stake in Mitsubishi in 2016, Mitsu actually has a three-year strategic plan, complete with budget for (much needed) research and development and capital spending. They plan to boost their growth by 30 percent over the next three years, with focuses on Asia and the United States. And of course, the cost savings from teaming up with Nissan don’t hurt, either.


(Now get us a new Evo and we don’t mean a dumb crossover. Unless it’s like, a new ultra-capable truck-let like the Pajero Evo or something. That would rule hard.)

5th Gear: BMW Drops In Profit But Not For Long, They Hope

BMW lost some ground to Audi and Mercedes in the quest to become the ultimate Teutonic luxury marque, but mainly because their cash went into new models which they hope will print money. Automotive News Europe writes:

[BMW] earnings before interest and taxes (Ebit) fell 3.2 percent to 2.3 billion euros. Operating profit margin slipped to 8.3 percent in the quarter from 8.5 percent a year earlier, within its 8-10 percent target range but below Audi’s 8.9 percent and the 9.2 percent at Mercedes-Benz.

BMW is adding upscale models such as the 8-series coupe and X7 SUV to regain momentum in its tussle with Mercedes-Benz for the lead in the global luxury-car market.

It’s also spending money to accelerate a rollout of at least 12 battery-powered vehicles by 2025 to pull at least level with Mercedes’s 10 billion-euro ($11.6 billion) plan to create electric autos. BMW plans to offer a convertible version of the electric i8 Roadster next year.


While all the German automakers have had to win back trust after the Volkswagen Group’s massive Dieselgate scandal, BMW doesn’t expect to stay down long. A redesigned 5 series, X3 and 4 series are all going on sale soon.

However, they’ll still have to address the European Union’s allegations that BMW, Daimler and Volkswagen all had a secret cartel going since the 1990s in regards to emissions-regulating AdBlue tank sizes and cheats to make too-small tanks appear to work. Better hope that X7 is a cash cow, just in case.


Reverse: Going Forward Really, Really Fast


Neutral: Japan’s Dealerships Sound Pretty Sweet

Would the sweet perks of Japan’s dealership model work to sell more American cars in America? Why or why not?