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Japan's minicar market heating up

Suzuki Motor Co.'s new Wagon R minivehicle

Publication Date : 19-09-2012


With the end of the Japanese government's subsidy programme for eco-friendly vehicles approaching, low-priced minivehicles have been attracting more attention, intensifying competition in the market.

Japan's two top minicar manufacturers--Daihatsu Motor Co. and Suzuki Motor Co.--have together held about 70 per cent of the minicar market for many years. But Honda Motor Co. is coming up fast from behind with its new N Box minivehicle, leading to fierce competition among the three companies in the minicar market.

Suzuki stumbles

Suzuki started selling its new Wagon R minivehicle--the most fuel-efficient minivan in Japan--on September 6, one year ahead of schedule. The engine of the Wagon R stops automatically when the minivehicle stops, a feature that is proving popular with buyers.

A senior official at Suzuki's regional sales company in Hamamatsu, Shizuoka Prefecture, said, "The number of customers hoping to test-drive the minivehicle has increased by almost 10 times."

However, on the day following the minivehicle's launch, Suzuki reported a recall involving the left rear door latch of the vehicle to the Land, Infrastructure, Transport and Tourism Ministry. The recall prompted speculation that the automaker might have hastily rushed the new Wagon R to market.

Suzuki led the nation's minivehicle market for 34 years until 2006. Since then, it has been No. 2.

Because the carmaker had not launched any new models for a while, its share in the minicar market declined by four percentage points from last year to 28 percent by August this year. Suzuki Chairman Osamu Suzuki expressed concern at an event launching the new Wagon R, saying, "Even though we have an advantage today, we can't say we'll have the advantage tomorrow."

Honda makes a leap forward

Honda, meanwhile, increased its minicar market share by eight percentage points from last year to 17 per cent this year.

Honda's N minivehicle series, launched in December, has gained popularity with its spacious interior, holding a commanding lead in the minicar sales ranking since April.

"We never imagined the series would sell so well," a senior Honda official said.

In autumn, Honda will start sales of its N One minivehicle, an updated version of its once-popular N360 minivehicle, in an effort to boost its minivehicle business.

Daihatsu, the nation's No. 1 minivehicle manufacturer, launched its fuel-efficient new Mira e:S model, dubbing it a third-category eco-friendly vehicle, which has set the trend for fuel-efficient minivehicles.

Daihatsu will promote sales of the new model in the Kyushu region, where minivehicles are widely used, and other areas to counter Honda's moves.

Competition with compact cars

All the eight major automakers, including Toyota Motor Corp. and Nissan Motor Co., are competing fiercely in the minicar market.

Minivehicle manufacturers supply vehicles to Toyota and Nissan, which they sell under their brands.

While minicar sales have been declining after peaking in 2006, the ratio of minicar users has been increasing due to a larger decline in the sales of standard-sized vehicles.

With income levels growing at a sluggish pace, many people are shifting to minicars because they are cheaper and are taxed at lower rates than regular-sized vehicles.

Observers say the end of the government's subsidy program for eco-friendly vehicles will have little impact on the minicar market because consumers are turning to smaller, cheaper cars anyway.

"The differences between regular-sized vehicles and minicars are disappearing," Suzuki said, suggesting that minivehicle makers face intense competition not only among themselves but also with makers of low-priced compacts priced at around 1 million yen.

Meanwhile, while profit from selling one luxury vehicle sometimes exceeds 1 million yen, the profit from selling one minivehicle ranges from several tens of thousands of yen to less than 200,000 yen. "We can make more profit by selling one luxury vehicle than by selling 10 minivehicles," a major auto sales company official said.

Automakers face the challenge of maintaining the market for regular-sized cars while increasing the profitability of minivehicles.


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