WASHINGTON, DC, September 10, 1998--Sales of all imported passenger cars in Japan have dropped 23.1 percent this year through October, the worst decline in a decade. Yet, Japanese consumers have increased their purchases of mini-cars whose sales have jumped 72.3 percent in November. However, importers have been unable to take advantage of this potential market since none either sell or have plans to sell mini-cars in Japan, according to [Japan Auto Trends] released today by the Japan Automobile Manufacturers Association (JAMA).

Nevertheless, importers are looking beyond the sales decline to position themselves for recovery, especially in the small-car market. For example, Ford Japan is planning to introduce its new European-built small car, the 'Ka,' in February 1999. Small cars are the segment between mini-vehicles and large cars according to Japan market definitions.

Similarly, Mercedes-Benz Japan this year introduced to the Japanese market its A-class model, it's first small car. The cars have sold extremely well in this difficult market with 6,500 orders through October.

"This new focus on Japan's car market by global manufacturers such as Ford and DaimlerChrysler suggests competition in Japan will become even keener. Japan's narrow roads, limited parking and need for fuel efficiency means Japan's consumers will continue to pay attention to smaller cars," said William C. Duncan, General Director, JAMA USA.

"Accordingly, those importers that successfully move into the small-car market will be better positioned. Those that don't will find little credibility in old arguments. They no longer will be able to claim that they are limited by government regulations or need U.S. government pressure on Japan to expand the number of import dealerships to achieve pre-set targets," Duncan added. Mini-cars are relatively inexpensive 660-cc vehicles. New government safety rules now permit larger and safer mini-vehicles than have been available in Japan. Mini-vehicle makers, Suzuki, Daihatsu, Mitsubishi, Fuji (Subaru), Honda and Mazda, are forecasting an overall 10 to 20 percent jump from a year ago in second half sales.

The December Japan Auto Trends also highlights [a study by Scott Latham Associates] that reports U.S. auto manufacturers have been closing unprofitable showrooms in a move to become more efficient. The Latham analysis indicates that U.S. automakers are seeking fewer, rather than more, dealerships in Japan, despite their claims to the contrary.

In addition, the newsletter explores what both Ford and Chrysler are doing to reposition their products, revamp their marketing strategies in Japan and bolster their investment in the Japanese auto industry.

Japan Auto Trends is a quarterly publication examining developments in Japan's auto market.