Automobile Assembly Parts Market
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Introduction Throughout the era of high economic growth, the Japanese automobile parts industry grew consistently. However, the collapse of the bubble economy saw the industry enter a downturn, and with competition in the automobile industry intensifying worldwide, it now finds itself confronting a period of great upheaval. The transition engulfing the automobile parts manufacturing industry can be characterized as follows: • Production volumes in the parts manufacturing industry are declining as domestic demand for automobiles decreases. • Demands for price reductions are growing stronger. • As automobile manufacturers expand their overseas manufacturing operations, they demand that parts manufacturers have an overseas presence. • As automobile manufacturers seek to optimize their supply chains, they more readily conduct business with companies that do not belong to their conglomerates. • Environmentally friendly technology is supported. • Modularization is supported. • Competition is intensifying as foreign parts manufacturers enter the Japanese market. In this changing business environment, the differences between Japanese parts manufacturers are being magnified. With companies increasingly willing to do business outside their conglomerates, foreign parts manufacturers are coming in and stirring up the Japanese market, and even eclipsing their Japanese counterparts. At the same time, Japanese parts manufacturers are being forced to take on their foreign competitors, and are increasingly undertaking mergers with a view to forming companies that can supply integral systems. Hence, it is likely that the on-going shake-up in the automobile parts industry will continue. This report does not cover all automobile parts, but specifically focuses on assembly parts for new automobiles. It covers the present structure of the market, relevant laws and regulations, and changes in business practices, as well as discussing prospects for the future. The report also examines foreign parts manufacturers that have already entered the Japanese market and trends in the parts that they have brought to the market. In this way light is shed on the methods by which foreign parts manufacturers enter the Japanese market and the various related issues that arise. In addition, sectors of the market that show promise for the future are identified, and advice is offered to potential entrants. This survey was carried out by the Yano Research Institute and the results have been collated by JETRO. Table of Contents Summary ....................................................................................................................... 1 I. Market Overview................................................................................................. 4 A. Background of the Automobile Assembly Parts Market................................................4 B Market Trends for Automobile Assembly Parts..............................................................8 II. Related Laws and Regulations.................................................................... 19 A. Gas emissions regulations ............................................................................................19 B. Fuel consumption regulations.......................................................................................21 C. Reducing the pollutant load..........................................................................................22 D. The Automobile Recycling Law ..................................................................................24 III. Business Models and Business Practices ............................................... 25 A. Structure of the Industry...............................................................................................25 B. Japanese Business Practices .........................................................................................28 IV. Market Trends for Individual Assembly Parts................................... 31 A. Radiators.......................................................................................................................31 B. Piston Rings..................................................................................................................33 C. Wiring Harnesses..........................................................................................................35 D. Headlights.....................................................................................................................38 E. Transmissions ...............................................................................................................41 F. Wheels...........................................................................................................................43 G. Shock Absorbers...........................................................................................................46 H. Disc pads ......................................................................................................................48 I. Fuel tanks.......................................................................................................................51 J. Seatbelts.........................................................................................................................54 V. Examples of Foreign Entry .......................................................................... 57 A. Entry to the Japanese Automobile Assembly Parts Market by Foreign Parts Manufacturers ...................................................................................................................57 B. Factors in Successful Entry to the Japanese Market by Foreign Parts manufacturers..58 C. Case Studies of Foreign Parts Manufacturers...............................................................60 VI. Advice Market on Market Access ............................................................ 65 A. Promising Markets for Foreign Parts Manufacturers ...................................................65 B. Issues Relating to Entry to the Japanese Market ..........................................................68 C. Promising Methods of Entry to the Market ..................................................................70 VII. Appendices...................................................................................................... 75 A. Related Organizations ..................................................................................................75 B. Automobile Manufacturers...........................................................................................78 C. Leading Parts Manufacturers........................................................................................79 D. Related Trade Fairs and Exhibitions (regular events) ..................................................82 Procedures for Investing in Japan .................................................................. 84 I. Summary and Procedures for Establishing a Base in Japan.............................. 84 A. Establishing a Base in Japan ........................................................................................84 B. Investment-Related Laws and Regulations ..................................................................86 C. Preferential Treatment for Investment in Japan............................................................87 II. Sources of Information on Investment in Japan ................................................ 90 A. Governmental Offices for the Invest Japan Program ...................................................90 B. Sources of Information in Investment in Japan ............................................................91 III. JETRO Services ................................................................................................... 94 A. JETRO Invest Japan Business Support Center (IBSC) ................................................94 B. Providing Information on Investment in Japan ............................................................95 Summary In 2003 the Japanese market in automobile parts for assembly was worth ¥10.32 trillion, which represented an increase of 5.1% over the previous year. This rise was due to the recovery of the Japanese economy and to healthy overseas manufacturing by Japanese automobile manufacturers. A breakdown of this total reveals that sales of parts for domestic production rose by 4.4% to ¥9.54 trillion, while parts sales for overseas production jumped by 15% to ¥779.6 billion. Hence, sales of parts for overseas production showed much stronger growth. In Japan there is now one automobile for every 1.7 people. As a result, the domestic market will be subject to the effects of fluctuating business conditions. As higher levels of automobile performance are required, the amount of money spent to produce a single vehicle is increasing. Notably, there has been an increase over recent years of features designed to enhance the safety and comfort of an automobile, such as air bags and car navigation systems. As a result, the cost of manufacturing a single vehicle is now approximately ¥250,000 more that it was ten years ago. The Japanese automobile industry resembles a pyramid, with the automobile manufacturers at the apex supported from below by almost 10,000 parts manufacturers. Automobile manufacturers manufacture certain parts such as engines and car bodies themselves, while the remainder are manufactured by first-, second-, and third-tier parts manufacturers. With approximately 70% of parts manufacturers having