Comprehensive Report: The Japanese Automobile Industry Analysis

This report provides a comprehensive analysis of the Japanese automobile industry. It begins with an introduction to the global commercial and industrial landscape, highlighting Japan's economic growth and the significance of its automobile industry. The report then delves into the industry's success, examining key factors such as technological innovation, cost-effectiveness, and the ability to cater to customer demands. It explores the major players like Toyota, Nissan, and Honda, and analyzes the reasons behind the industry's expansion, including economic prosperity, increased domestic demand, technological advancements, and supportive infrastructure. Furthermore, the report discusses recent trends, including the shift towards electric vehicles and the challenges posed by competitors. Overall, the report offers valuable insights into the dynamics and competitiveness of the Japanese automobile industry.

Running head: JAPANESE AUTOMOBILE INDUSTRY
Japanese Automobile Industry
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction......................................................................................................................................2
Japanese Automobile Industry.........................................................................................................3
Reasons behind success and expansion of Japanese automobile industry......................................6
Recent trends in Japanese automobile industry.............................................................................11
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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Introduction
The global commercial and industrial scenario, over the years, has been subjected to
considerable changes and dynamics, with the initially developed countries taking backseat and
the new economics gaining predominant positions with their impressive economic growth and
prospering industrial sectors (Ozawa 2014). One of such countries, which have consistently
shown impressive trends in economic and overall growth, in spite of all the turmoil and hurdles
in its path of progress, is that of Japan. With one of the highest growth rates, this market oriented
economy ranks third globally, in terms of Nominal GDP and fourth in terms of the purchasing
power parity.
Much of the economic prosperity and increased standard of living of the country can be
attributed to the industrial development of the country in the last few decades. The country has
been known for their excellent innovations, technological progress and robust investment trends,
which have helped the industrial sectors as well as the overall economy of the country, grow
impressively. Of the primary industries, which have grown considerably and has made marks in
the international markets, a significant one is the automobile industry of the country (Carlsson
2012).
Over the last few decades, the automobile industry in Japan has grown impressively,
thereby making the country one of the largest car producing nations in the global scenario. Much
of the success and expansion of the automobile industry of the country can be attributed to the
presence of continuous innovation, technological progress and cost effectiveness in the
production process. The industry has emerged as one of the primary competitors in the global
automobile market, giving considerable competitions to other global automobile brands. Keeping

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this into consideration, the concerned report tries to discuss the current dynamics in the
automobile industry of the country and with the help of the existing empirical evidences tries to
analyze the level of competitiveness the industry has been able to pertain in the international
framework, in the contemporary period.
Japanese Automobile Industry
Japan ranks among the top three global automobile producers, known for their special
and innovative technologies, catering to the demands and requirements of the clientele not only
in the country itself but also across different parts of the world. The automotive and vehicle
manufacturing industries together not only form a major share of the manufacturing sector of the
country, but also consists of one of the most famous exports of the country.
Figure 1: Global share of sales of cars by countries (2012)
(Source: Kawahara 2012)

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As can be seen from the above figure, the automobile sector of Japan enjoys almost 6%
of the global sales of vehicles after the global giants like that of the USA and China. Of the
different vehicle manufacturing brands present in the country, the most popular ones, enjoying a
considerable share of domestic as well as international clientele are mainly Toyota, Nissan,
Honda, Mazda, Lexus, Mitsubishi and others. Apart from vehicles, the industry of manufacturing
automotive components is one of the most flourished industries in the country, with the
automotive parts manufactured in the country being used in six continents.
The automobile sector of the country is also one of the primary sources of employment
with nearly 5.5 million people of the country being employed in the vehicle and automotive
related industries, which amounts to nearly 8.7% of the total workforce of the country
(Sierzchula et al. 2012). Based on the number of sales, both domestically as well as in the
international scenario, the leading vehicle companies of the country are as follows:

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Figure 2: Sales of the top vehicle brands in Japan
(Source: Statista.com, 2018)
As can be seen from the above figure the primary vehicle companies of the country, over
the years, have been, Toyota, Honda, Nissan, Mazda and Daihatsu, with considerable market
shares in domestic as well as international domains. There have been several crucial reasons
behind the consistent growth of the industry in Japan, few of which are discussed in the
following section of the report.

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Reasons behind success and expansion of Japanese automobile industry
The Japanese automobile industry, in the last few years, has been considered to be one of
the most competitive and productive one in the international automobile market, much of which
can be attributed to the unique characteristics present in the industry as well as in the economic
and regulatory trends in the country. This in their turn has helped in helping the industry of the
country gain a positive edge over their international rivals. The primary factors being discussed
as follows:
a) Steady growth of economic prosperity- One of the primary cause of the expansion and
prosperity of the automobile industry of Japan has been the steady increase in the GDP growth of
the country, which in turn indicates towards the growing economic prosperity of the economy as
a whole, as can be seen from the following figure:
Figure 3: Growth of the GDP of Japan over the years
(Source: Tradingeconomics.com, 2018)

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As is evident from the above figure, the economy of the country as a whole has
experienced a robust and consistent increase in the GDP over the last few decades, which
indicates towards an overall productive production environment and strong demand in the
country (Gao, Hensley and Zielke 2014). This in turn, is expected to cater positively to the
growth of different industries in the country, which also includes the automobile industry.
b) Increase in the domestic demand for automobiles- With the increase in the income of the
population of Japan as a whole, the demand for a better life style also was felt, which in turn
catered to the increase in the demand of vehicles in the country. The automobile sector of the
country not only experienced an increase in the demand for small and domestic vehicles but also
experienced a higher demand for industrial vehicles like trucks. This can be seen from the
increase in the number of vehicle registrations in the country, which can be seen from the
following figure:
Figure 4: Car registrations in Japan over the years
(Source: Tradingeconomics.com, 2018)

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The number of registrations of vehicles in Japan has remained considerably consistent
with occasional peaks and troughs. This in turn indicates towards an increase in the domestic
demand for vehicles in the country, which can also be considered as one of the primary reasons
behind the increase in the expansion of the Japanese automobile industry of the country (Kim
2018).
c) Technological innovations- One of the primary advantages which the automobile industry of
Japan experiences and which contributes significantly to the competitiveness of the same,
keeping them privileged among the other global supply side providers in this industry. Japan,
especially in the post war periods of 1955, started experiencing expansions and improvements in
the overall manufacturing operational framework, especially in the automobile sector. Much of
which can be attributed to the extraordinary technological innovations in the country. Japan has
been known for their special ability of constant thriving for innovations, which help them to
reduce their cost of production in general.
In case of the automobile industry, Japan has always remained in the forefront and
trendsetter in the aspects of implementations of digital technologies in the production line
management. This in turn, has contributed immensely in making their vehicles cost efficient as
well as well equipped with facilities, which costs higher in other countries (Wardsauto.com,
2018).
d) Catering to customer demands- The automobile manufacturing industry of Japan is known
for their innovations, which not only contributes in reducing the cost of production of the same
and makes the cars budget friendly, but also for the features in these cars which increases the
level of convenience of the customers. Japanese cars known for their technological superiority,

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utility, cost effectiveness, durability and customer satisfaction, which make them more
demanded in comparison of the pricey, ornate but less feature equipped vehicles.
Figure 5: Export share of automobile sectors in different countries
(Source: McCarthy, 2018)
The ability of the Japanese automobile industry to cater to the demands of the customers across
the world made it one of the top most exporters of vehicles in the international scenario after
Germany in the last decade.
e) Supportive infrastructure- The government of Japan has always been supportive to
increasing expansion of the activities in the industrial sectors of the country. Along with the
presence of infrastructures, facilitating inflow of ideas and innovations, the government
regulations and productive investment structure benefits the overall industrial growth in the
country, the automobile industry not being any exception.

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f) Environmental awareness- The automobile industry of Japan has been identified to be one
addressing the environmental issues of concern, which includes the issues of high carbon
emissions, emission of CFCs, trichloroethane and others from fuel consumption by the
automobiles. Keeping these issues in consideration, the automobile manufacturers of the country
constantly implements measures and innovations to make their vehicles fuel efficient and to
produce new vehicles running on electricity (Yabe et al. 2012). Vehicle recycling and recycling
within the manufacturing process are also implemented in the Japanese automobile industry.
g) Exports market- Japan, over the last decade has experienced immense expansion in the share
of markets outside the domestic boundaries of the country. The cost efficiency, budget
friendliness, fuel efficiency and higher utility of their cars have helped the manufacturers to
acquire higher market share in the international market, thereby giving them a competitive edge
over the rival companies in other countries, which can be seen from the following figure:
Figure 5: Exports of Japanese cars over the years
(Source: Tradingeconomics.com, 2018)

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As can be from the above figure, the demand for global exports of Japanese vehicles, which fell
drastically in 2010, owing to the overall crisis period in Japan and global economy at that point
of time, however, increased considerably and regained back its strength. Much of which can be
attributed to the strong alliance of the automobile industry of the country with the other leading
economies in the world like that of the USA and the UK. The industry has experienced rapid
increase in demands for their products, over the last few years, in the USA and in the newly
emerging markets of the Middle East, much of which can be due to the presence of a weaker
local currency, thereby making the Japanese vehicles cheaper for the foreign importers.
Recent trends in Japanese automobile industry
The growth trends of the automobile industry of Japan, which had been growing in the
last decades, owing to increase in the production as well as exports of the same in the
international markets, have been seen to be facing stagnation to some extent in the recent period,
as can be seen from the following figure:
Figure 6: Country wise share of global motor vehicle production over the years
(Source: Rba.gov.au, 2018)

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The above figure makes it evident that the global share of motor vehicle production of
Japan, which had consistently maintained a standard trend in the past decade (till 2005), has been
experiencing a negative dynamics, as can be seen from the falling rate of production, after 2005.
The primary reason behind the fall in the competitiveness of the automobile industry of the
country can be expected to be the increase in the demand for the automobiles produced by the
Chinese manufacturers (Cnbc.com, 2018).
In the recent period, with the aspects of environmental pollution and carbon emission
becoming global issue of concern, the international automobile industry shifting towards the
production of cars driven by electricity and other renewable resources. The automobile industry
of Japan has also been seen to shift their production in this aspect (Law 2017). However, the
automobile industry of the country is seen to be lagging behind other countries in terms of the
exports and productions of vehicles driven by electricity as can be seen from the following
figure:
Figure 7: Global Electric Vehicle Market
(Source: Forbes.com, 2018)

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Japan lies much below other countries like Norway, China, UK and others in terms of
electric vehicle market. The export markets of the top most vehicle brands in Japan has also been
seen to be reaching a saturation level, especially in its primary client countries like the USA.
Conclusion
From the above discussion, it can be concluded that the automobile industry of Japan,
which had experienced impressive growth in the last decades, has been facing stagnation to some
extent in the current scenario with more competing companies coming in the supply side of the
global automobile industry. This has in its turn decreased the competitiveness of the Japanese
automobile industry to some extent, especially in terms of the new genre of automobiles and also
in terms of saturation in the global markets. Keeping this into consideration, the automobile
industry of Japan has to incorporate relevant changes and modifications to suit the recent trends
of global demand as well as to keep an edge over the competitors in other countries.

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References
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