A 30 percent drop in the value of the Japanese yen in eight months has U.S. automakers
howling, but it isn't changing U.S. consumers' behavior much -- yet.
It may be because Japanese automakers are, for now, content to ride an improving market rather than fight for market share, says Morgan Stanley auto analyst Adam Jonas. But by next year, the $2,000-per-car cost savings that a cheap yen gives Toyota, Honda and others is likely to begin showing up in extra features and longer warranties, he says.
"They've been on a hunger diet for four years and want to improve their product," said Jonas, noting that on May 8, Toyota said it would increase its capital investment budget 10% this year. "You'll see better cars, not a price war."
The yen began dropping last September, shortly before the election of Prime Minister Shinzo Abe, who has committed to stimulating the world's third-largest economy through easier monetary policy, much as the Federal Reserve has done in the U.S.
So far, it hasn't made much difference in U.S. auto buyers' choices.
In April, the Detroit 3 automakers had a higher market share than a year ago, according to reports by Autodata. The top four Japanese makers all lost share.
One reason is that Japanese automakers have been slow to pass on the savings as lower prices or more financing incentives, one dealer said.
"The impact so far is nothing, nada, zero," said Bill Fox, partner at Fox Dealerships in Auburn, N.Y., whose company owns dealerships for Chevrolet, Chrysler, Honda, Toyota and Subaru. "We have no greater discounting from the Japanese brands. It's status quo."
The impact has also been small because most Japanese cars sold in North America are assembled here, too, IHS Global Insight economist Sara Johnson said.
"The yen-dollar exchange rate hasn't been a major factor" in 2013 sales, Honda North America's Jeffrey Smith said. "Honda makes 90 percent of the cars it sells in North America right here in North America."
The currency gives the most boost to luxury models such as Lexus and Infiniti, which are manufactured in Japan, but those brands have lost ground to German rivals during a period when a strong yen forced Japan's automakers to go slow on improving their products, Jonas said.
Lobbyists for Detroit's automakers gripe that the drop in the yen was designed to help Toyota, Honda and other Japanese brands export, and not to stimulate Japan's home market, which is too small to absorb all the cars Japan can make.
For cars built in Japan and exported to the U.S., the drop in the yen creates a cost advantage of as much as $6,000 compared with the same car made last summer, said Matt Blunt, president of the American Automotive Policy Council, a trade group for Ford, General Motors and Chrysler.
Every time the dollar's value moves up by one yen, it gives Toyota, Honda and Nissan about $100 per car to put into new features, Jonas said. Even if Japan's automakers don't cut prices, U.S. dealers could find themselves selling against Japanese products with upgrades, he said.
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