Asian carmakers move "Up-Market" in Europe

Discussion in 'Other Manufacturers' started by tigerhonaker, Oct 3, 2006.

  1. tigerhonaker

    tigerhonaker Platinum Contributor

    Asian carmakers
    move up-market
    in Europe

    Web posted at: 10/1/2006 9:5:51

    Source ::: Reuters

    Paris • Asian carmakers aim to churn out higher profits in Europe by moving up-market now that they have established a solid foothold in the region, while their local rivals struggle with excess inventories and restructuring costs.

    Automakers such as Toyota Motor Corp and Honda Motor Co have slowly but steadily built up their shares of a shrinking western European market but have struggled to approach the profit levels they enjoy in North America.

    Making money in Europe — a difficult task due to the prevalence of cheaper compact cars and an overcrowded market — has become even tougher as excess inventory at Volkswagen AG and others fuels a ferocious discounting war and as production costs rise with higher commodity prices.
    To fight such headwinds, Honda, Japan’s third-ranked automaker, said it aimed to re-position itself as a premium brand and shed its image as a maker of run-of-the-mill but reliable cars.

    “We want to move upscale,” Honda Motor Europe President Shigeru Takagi said at the Paris motor show this week, adding the new Civic series and the CR-V crossover, unveiled at the show on Thursday, would help steer it towards that goal. “This will be the path for us going forward.”

    Nissan Motor Co has a similar strategy in mind with offerings such as the Qashqai — a small four-by-four offroader — to take the place of conventional sedans and wagons such as its Primera and Almera models.

    “We tried for 15 years in these segments, which are very crowded and competitive,” said Colin Dodge, senior vice president of manufacturing and purchasing at Nissan.

    “It’s much better to stay away from ‘me-too’ cars,” he said, adding that its strategy was better for profitability even though the vehicles’ dynamic designs might mean smaller volumes.

    “Our profit target for next year is bigger than for this year,” Dodge said.

    Hyundai Motor Co., South Korea’s top automaker, has the same idea as it also looks for a means to pre-emptively fend off competition from the eventual entry of Chinese automakers into the lower end of the market.

    “There will be a Chinese threat in the future; you can’t deny that,” said K H Ahn, senior vice president of Hyundai’s international operations. “That’s why we’re trying to move up fast.” A new C-segment car unveiled in Paris code-named FD and designed specifically for Europe follows this strategy, he said.

    Toyota, for its part, is counting on an increase in sales of its Lexus luxury brand to improve its profit structure in Europe. Automakers acknowledge that the road to fatter margins won’t be smooth.

    An increase in the share of diesel vehicles in their line-up will pressure margins, while the need to meet forthcoming carbon dioxide emission regulations of 140 grams per km for new cars means bigger spending on research and development.

    “Profitability-wise, (adding diesel sales) is not so favourable for us,” said Tadashi Arashima, Toyota’s European chief. “We need to work on this more, but to achieve this CO2 140 gram target diesel is one way to reduce the overall CO2, so we have to do this.”

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