27 January 2016

Ford's Asian Retreat

Not required in Japan

The challenge in selling cars in Asia is based around a few key issues. Firstly, a car industry that is almost inevitably protected by duties on fully imported vehicles. Secondly, it seems to be a region where anything looking like risk or daring is avoided. So if a car brand has a reputation for reliable motoring, they stick with what they know.

To penetrate the region as a relative latecomer is a challenge. To compete in a country with tariff protection, local production is essential. Opening a plant isn't going to result in immediately gaining large sales, as you have to spend years trying to win over customers to the brand. With the loyalty that manufacturers such as Toyota and Honda have, losses would go on for years, maybe never reaching a high enough production volume to be profitable. For that reason GM recently closed its assembly plant in Indonesia.

Ford has been trying to win over the customer without a production facility but ended up unable to compete with big assemblers such as Toyota. It is now pulling out of sales in Indonesia. Ford is even going one step further and leaving Japan too, including the end of product development there. As Japan is one of the few unprotected markets in Asia, why leave?

Sales of cars are on a decline in Japan. The Japanese support their own brands with the unity you find in a termite colony. It is also a country of red tape, so that may also make importing unnecessarily expensive (that is a personal assumption). Whatever the problems, Ford isn't going to subsidise certain market just to have a presence with no hope of profitability. I'm surprised they couldn't stay with Japan and at least break even.

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