Nissan takes lead in producing Japan car abroad, where labor costs are cheaper

Nissan takes lead with Thai-made March in Japan

YOKOHAMA, Japan — Nissan took the wraps off its new March subcompact Tuesday, which is being manufactured in Thailand for sale in Japan, underlining a trend for Japanese automakers to shift more production abroad.

Nissan Motor Co. said it was setting up a special inspection facility at its Oppama plant in Japan, which used to make the model, to do additional quality checks on the Thai-made March to ensure it makes the cut with notoriously finicky Japanese customers.

“We are not hiding that this was made in Thailand,” Nissan Chief Operating Officer Toshiyuki Shiga said in answer to a reporter’s question on why his presentation had focused on the car’s green features, not where it was made. “It is important to deliver value to customers wherever we make our products.”

The March, previously been made in Great Britain, will now also be made in India, where it will be exported to more than 100 countries in Europe, the Middle East and Africa. The model — called the Micra in Europe, India and Australia — will be produced in Mexico and China as well.

As home to top automakers including Toyota Motor Corp. and Honda Motor Co., Japan has long been a market where local manufacturers reign supreme. Imports make up just 5 percent of the Japanese market, mostly European luxury brands such as BMW and Mercedes-Benz.

But with labor costs rising in Japan and the yen staying strong against the dollar, automakers are looking at making more vehicles abroad for export to global markets and in some cases for sale in Japan — known as “gyaku yunyu” or “reverse imports.”

Nissan, allied with Renault SA of France, is the first major Japanese automaker to make the move in a significant way — doing so with a popular subcompact whose sales totaled 31,600 vehicles in Japan, and nearly 122,000 worldwide last year.

How the March fares will be a crucial test for Nissan’s strategy.

It will also be a test for global quality controls. A lack of global quality checks have been cited, both by outsiders and company officials, as one contributor to Toyota’s massive recalls totaling more than 8.5 million vehicles since October over a spate of problems including sticky gas pedals and braking glitches.

Mamoru Katou, analyst with Tokai Tokyo Research, says moving production abroad will be largely limited to cheaper models. Buyers aren’t as fussy about where such cars are made and are happier just getting a good deal, he said.

But it won’t be that easy for Toyota to follow suit because it has excess capacity in Japan and doesn’t have many supercheap models, he said.

“It’s not going to be that easy for others,” Katou said. Nissan took the lead because it has already slashed production in Japan ahead of its rivals, he said.

“I was initially worried about the possible damage to a company’s image. But where a car is made matters less than the price for people buying cars at below a million yen (about $11,000),” Katou said.

“There is definitely a plus for manufacturers to move production abroad because it’s so much cheaper,” he said.

The March starts in Japan at 999,600 yen ($11,000).

Toyota produces models for export in Thailand, including the Corolla subcompact and IMV pickup and sport-utility models, but doesn’t sell them in Japan. South Africa also serves as an export hub for Africa and parts of Europe for Toyota, according to the company.

Nissan said it had developed a global manufacturing system to ensure quality standards.

Nissan is planning a compact based on the March platform, with an annual sales target of more than a million vehicles in 2013.

Japan production will focus on higher-end models including the Leaf electric vehicle, which will be available later this year.

“We have made preparations to meet our standards for global quality,” Shiga said of the March at Nissan’s Yokohama headquarters.