Toyota, Honda's Diesels Threaten European Carmakers (Update2)

Discussion in 'Other Manufacturers' started by tigerhonaker, Sep 30, 2006.

  1. tigerhonaker

    tigerhonaker Platinum Contributor

    Toyota, Honda's Diesels Threaten European Carmakers (Update2)

    By Kae Inoue

    Sept. 28 (Bloomberg) -- Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., Japan's three largest carmakers, will highlight diesel models at the Paris Motor Show today as they aim to grab a greater share of a segment that accounts for half of all car sales in Europe.

    Toyota will introduce the Hilux pickup equipped with a newly developed 3-liter diesel engine. Nissan will display the Qashqai crossover vehicle, its seventh diesel-powered model in Europe. Honda, Japan's third-largest automaker, will show a redesigned CR-V sport-utility vehicle with a diesel engine.

    The Japanese carmakers are targeting Europe to reduce their reliance on the U.S., which accounts for as much as 60 percent of their operating profit. The new models will add to pressure on Volkswagen AG and PSA Peugeot Citroen, Europe's two-largest carmakers, both of which are cutting jobs.

    ``It's critical for Japanese automakers to offer more diesels to compete with European makers and to boost sales and profit,'' said Atsushi Osa, who helps oversee $4.1 billion at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Europe is one of the most competitive markets in the world and it won't be as easy as the U.S.''
    Toyota's sales, including both diesel and gasoline-powered vehicles, rose 9 percent in Europe in the first eight months of 2006. Honda sales in Europe gained 6 percent, according to the European Automobile Manufacturers Association. Nissan's sales plunged 17 percent after customers turned away from aging models including the Primera midsized car and the Micra subcompact car.

    Toyota shares rose 0.5 percent to 6,400 yen at the 11 a.m. trading break in Tokyo. Nissan shares rose 0.5 percent to 1,325 yen and Honda shares rose 0.5 percent to 3,890 yen.

    New Models

    Japanese automakers will roll out at least 20 new or redesigned vehicles with diesel engines by 2010 to boost sales beyond the 13 percent market share they posted in Europe in 2005, said Koji Endo an analyst at Credit Suisse in Tokyo. From 2008, new vehicles sold in the European Union must have average carbon dioxide emissions 25 percent less than 1995 levels, he said.
    Toyota expects annual sales of diesel models rise 25 percent to 1 million vehicles from the current 800,000, Kazuo Okamoto, executive vice president in charge of development, said yesterday in an interview in Paris. The majority of the sales will come from Europe, while the rest may come from full-size pickup trucks in the U.S. and commercial vehicles in Japan, he said.

    ``We plan to strengthen our line-up in Europe,'' said Katsuaki Watanabe, president of Toyota, on Sept. 20 in Tokyo. ``We want to introduce more fuel-efficient, low-emission power trains, such as diesels and hybrids.''

    Volkswagen is cutting 20,000 jobs in its home market of Germany as it tries to reduce costs. Earlier this week, Peugeot said it will eliminate 10,000 jobs to end an earnings slump.

    Behind Europeans

    Japanese carmakers prioritized gasoline engines because of the cost of developing diesels for which Europe is the biggest market. Almost 50 percent of the 14.5 million vehicles sold in Europe last year had diesel engines. Toyota had 5.8 percent of the European market in the first eight months of 2006, while Honda had 1.7 percent and Nissan 2.1 percent.

    Toyota, Honda and Nissan, which are posting record earnings largely aided by demand in the U.S., now have ``enough financial resources to develop and sell their own diesels,'' said Yasuhiro Matsumoto, a senior analyst at Shinsei Securities Co.
    Developing a diesel-powered vehicle is 30 percent to 50 percent less profitable than developing a new gasoline-powered vehicle for the Toyota and Honda because they don't get the same economies of scale, according to an estimate by Credit Suisse. It costs between 80 billion yen and 100 billion yen ($854 million) to develop a brand new engine from scratch, Credit Suisse's Endo said.

    Diesel's Costs

    Diesel vehicles cost about 2,000 euros ($2,500) more than gasoline-powered autos. European consumers are willing to pay more because diesel fuel is taxed less and diesel engines have 30 percent to 40 percent better fuel economy, said Graeme Maxton, managing director at Autopolis, a London-based consulting firm.

    For Toyota, diesel vehicles made up about 41 percent of its total auto sales in Western Europe in the first six months of 2006. The company, which offers 12 models powered by diesel engines in Europe, has said it wants to bring that level higher. Honda, which has four diesel-powered vehicles, said diesel vehicles accounted for 28 percent of its vehicles sold in Western Europe in the first six months of 2006.

    The Japanese automakers aim to take a larger share in Europe to lessen their dependence on North America. Europe accounts for about 10 percent of Japanese automakers' operating profit, compared with more than 60 percent from North America, analysts said.

    Diesels in Japan

    DaimlerChrysler AG, the world's fifth-largest automaker, introduced a diesel-powered Mercedes-Benz E320 CDI Avantgarde luxury car in Japan last month, a move that may be followed by domestic automakers.

    Honda may sell diesel-powered vehicles in Japan within three years, said Takeo Fukui, president of Honda, in an interview in June.

    The Tokyo-based company will begin selling what it says will be the world's cleanest diesel engine in the U.S., Japan, Europe and emerging markets after 2009. Toyota's Watanabe as well as Nissan Chief Executive Carlos Ghosn have said they have diesel technology suited for the Japanese market.

    ``Europe will be a great market to test their potential in diesel-powered vehicles,'' said Sumitomo's Osa. ``One of these days we may see diesel vehicles on Japan's streets.''

    To contact the reporter on this story: Kae Inoue in Tokyo at

    Last Updated: September 27, 2006 23:38 EDT
  2. AshenGrey

    AshenGrey Well-Known Member

    I can see Honda getting into the diesel market sooner than Toyota. Honda is basically an engine manufacturer that just so happens to make cars. They make engines for cars, boats, power tools, generators, motorcycles, and scooters. Diesel tech shouldn't be a big stretch for them.

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