Japanese carmakers hope that a tsunami of new models in the minivehicle segment will provide the push needed to get Japan's car sales back in gear.
Every Japanese minivehicle maker unveiled a new lineup in early October to conform to revised government size and safety regulations. Some updated their previous models, while others debuted brand-new nameplates in different categories.
The new rules unleashed 16 models in a mere 10 days. The greatest new-product flood to hit Japan in several years, the outpouring was particularly astounding in light of the dismal state of Japan's car market.
Analysts said the new models should aid sales of minivehicles, which have engines under 660cc. But they questioned for how long, and whether the gains would prime the rest of the market.
They also said that because the new models offer better crash protection, they may show up in overseas markets such as Europe.
Suzuki Motor Corp., Mitsubishi Motors Corp., Honda Motor Co., Fuji Heavy Industries Ltd., Mazda Motors Corp. and Daihatsu Motor Co., a unit of Toyota Motor Corp., launched new models.
Major impact on slump
If the new models succeed, they will have a major impact on the slumping Japanese market. Through September, sales of domestically built vehicles in Japan are off 13 percent from a year earlier, to 4.28 million units.
The market has now been down for 18 consecutive months, battered by Japan's worst economic recession since the end of World War II.
Minivehicles traditionally account for more than a quarter of the Japanese light-vehicle market. They are priced at the lowest end of the market and offer low operating costs because of better fuel efficiency, lower tax rates and lower insurance costs than larger models.
Minivehicles are perfect for yen-pinching consumers, said industry executives.
'If we introduce a more valuable car for the customer, this segment will expand,' said Mitsubishi Motors Corp. President Katsuhiko Kawasoe.
Bigger and cheaper
The new models differ from their predecessors in several ways:
They are larger. The new rules let minis grow 3.9 inches longer and 3.1 inches wider than before, to 133.7 inches long and 58.1 inches wide. In addition, they also must now pass 31-mph front- and side-impact tests, and reduce fuel spills in a rear-end collision.
The new regulations put minivehicles more in line with global safety standards, making it possible for Japanese makers to consider overseas versions of what until now had been a Japan-only product.
The Suzuki-General Motors Sub-S project in Europe, for instance, is a subcompact designed jointly by the two companies but derived from a Suzuki minivehicle platform, Merrill Lynch Japan analyst Takaki Nakanishi noted in a recent report.
They are priced lower. For instance, the new Suzuki Wagon R, Japan's best-selling car, averages about ¥40,000, or $320 at current exchange rates, less than the prior model, at $5,584 to $9,496. Mitsubishi's new Minica, Pajero Mini, and Toppo BJ (for 'Big Joy') also are priced about $150 to $225 below the prior models. Suzuki cut the price of another model, the Alto, below the psychologically important ¥500,000 level to ¥498,000, or $3,984. Other makers also trimmed prices.
They offer more features. In particular, the new models raised fuel economy to counter the public expectation that bigger would mean thirstier. According to a Ministry of Transport study, the new models' fuel consumption improved 2.7 percent, to 44 mpg on an adjusted, sales-weighted average.
The new Subaru Pleo, for instance, uses a continuously variable transmission and an engine fitted with a supercharger tuned to operate at low speeds, dubbed a 'mild charger,' to get 41.4 mpg. Other makers offer lean-burn engines, variable valve timing and four-speed automatic transmissions.
Axing prices was easy, said Merrill Lynch's Nakanishi.
'This was an excellent opportunity for mini makers to change the cost structure of their platforms,' since any of the existing models had gone unchanged for over five years, he said.
Bigger and cheaper alone is not enough, however.
'There's some interest in the new models, but consumers will keep their wallets closed,' Nakanishi predicted. 'The economy is pretty slow, and consumers are on a tight budget. So I don't expect consumers to rush to minivehicle dealerships.'
But the raft of new models, attractively priced, should provide some boost to the market, he admitted.
From October 1998 to March 1999, which marks Japan's fiscal second half, minivehicle sales will climb 8.0 percent to 860,000, after dropping 7.3 percent in the fiscal first half as buyers waited for the new models, he predicted.
Unless the Japanese economy picks up, though, he forecast that demand would start to slip again by October 1999.
'You need new products,' not just new versions of old ones, said Nakanishi. He said the best hope for continued strength lay in minicars whose styling is a hybrid of cars and sport-utilities, such as the newly debuted Suzuki Kei and Honda Z.
Even Suzuki Motor President Osamu Suzuki conceded that for the full fiscal year to March 1999, minivehicle sales will ease 2 percent to 1.5 million, because of weak minitruck sales. But Suzuki's minicar sales will rise nearly 10 percent in the current six-month term, he forecast. Other makers are equally bullish - for their own lineups.
In reality, makers 'don't particularly expect a boom in consumption,' said Chikao Masuzawa, analyst at ING Barings Securities Japan. 'Their concern is keeping their market share and unit volume.'
To that end, a flurry of ads will herald the new models. Honda hired American country-rock band ZZ Top to sing the praises of its new Z, which comes with four-wheel drive and an engine mounted midship just in front of the rear axle.