GENEVA -- Japanese cars, for long an unattractive proposition for drivers in Europe, are now proving a little too popular for local automakers.
European manufacturers, battling with falling demand, fierce pricing competition and overcapcity, are having to take rivals Toyota Motor Corp., Honda Motor Co Ltd. and Nissan Motor Co Ltd. more seriously than ever before.
The Japanese, strengthened by a solid range of fresh models, are boosting their sales in Europe and carving out market share at the expense of Volkswagen, Renault, Ford and General Motors.
Experts point to their ascendancy in the world's biggest car market, the United States, where they and the Koreans are threatening the hegemony of the "Big Three" -- GM, Ford and the Chrysler division of DaimlerChrysler.
"The Japanese are definitely coming to Europe. Toyota is a threat," said one European executive at a U.S. automaker at the Geneva car show.
The Japanese, long renowned for high quality and efficient manufacturing systems, have now begun to address their former shortcomings head on, coming up with stylish models well adapted to local tastes, embracing diesel engines and improving their dealership structure.
Now they need to build up the strength of their brands to enhance loyalty and lure more new buyers.
"Rationally, Japanese carmakers are well equipped to take on the Europeans, but there is still a strong emotional tie to national brands here and that is what they will have to work on to make further gains," said one German-based analyst.
The companies have been most successful in the U.K., where customers are less loyal to British brands which have been bought by foreign companies, but they have also made inroads on the continent.
Last year, Japanese carmakers increased their combined share of the western European market to 11.4 percent, up a whole percentage point from the previous year, according to European carmaker association ACEA.
TOYOTA STREETS AHEAD
Toyota, which has pumped four billion euros ($3.5 billion) of investment into Europe, aims to break even there in the fiscal year ending this month.
It hopes to boost its market share to over five percent on sales of over 800,000 units by 2005, up from 755,600 last year.
Toyota Europe's Executive Vice President and Chief Operating Officer Takis Athanasopoulos told Reuters this week he expected the company to reach that target a year early.
It aims to sell 790,000 cars this year, buoyed by the success of its medium-sized Corolla and small Yaris, Toyota's biggest seller in Europe, at 235,000 units last year.
"The biggest challenge is to grow in countries where national brands are strong," said a Toyota Europe spokesman. Following its success in the UK, the company is targeting Germany and Spain.
Germany, Europe's biggest car market and home to auto giants VW, Mercedes Benz and BMW, is renowned for being tough to penetrate.
Honda Europe, which will wind up its fiscal year ending in March in the black, expects its sales to nudge up to 210,000 in Europe this year from last year's 196,000, and is also trying to enhance its brand image.
"Our job now is to consolidate the changes and strengthen the stability of our dealer organization and we need to build our brand image in Europe," said Chris Rogers of Honda Europe.
It aims to do this by building up its reputation as a pace setter in technology, helped by its parent company's prowess in environmentally clean vehicles.
It is also to introduce its first ever diesel engine to Europe this year, an important step given that diesels account for about a third of the European market and are expected to grow further.
Partnerships with local producers will also help the Japanese build up their expertise and tune into national preferences.
Toyota's joint venture with French carmaker PSA Peugeot Citroen to jointly build small cars in the Czech Republic will help it to tap local knowledge and keep a lid on investment costs.
Nissan, hoping to boost its 2.7-percent western European market share with its new Micra, will gain to a much greater extend from its alliance with Renault as it makes savings on purchasing and distribution.