Toyota Motor Corp. and Honda Motor Co., Japan's two biggest automakers, may increase overseas output as a stronger yen makes exports less competitive.
"We must think about producing overseas what is now being produced in Japan,'" Toyota's Executive Vice President Takeshi Uchiyamada said at the Tokyo Motor Show Wednesday. The yen may "have a big impact on Japanese production," Honda's President Takanobu Ito said.
Japanese carmakers have lost U.S. market share to Korea's Hyundai Motor Co. after the yen strengthened to a 14-year high in January. The carmakers have capacity available in North America after slashing production amid tumbling U.S. auto sales.
"The strong yen is a major challenge," said Ashvin Chotai, managing director of Intelligence Automotive Asia. "The yen at 90 per dollar is considered the tipping point where Japanese automakers rapidly relocate production overseas."
The yen reached 88.01 against the dollar on Oct. 7, nearly matching January's high. It traded at 90.71 per dollar as of 5:34 p.m. in Tokyo.
Nissan Motor Co., Japan's No. 3 automaker, will fully use its capacity in the U.S. and Mexico in the "very short term," Chief Executive Officer Carlos Ghosn said. "The U.S. dollar has become very competitive," he added.
Prius production
Nissan's U.S. utilization rate has come down to "60 to 70 percent," said Carlos Tavares, the company's executive vice president in charge of the North America region.
Toyota shifted production of its RAV4 sport-utility vehicle to Canada last year and started building the Highlander SUV this month in Indiana.
The company is also planning to make the Prius gasoline-electric hybrid at a new plant in Blue Springs, Mississippi.
"Toyota, Honda and Nissan need to be doing everything to slash costs," said Yoshihiro Okumura, who helps oversee the equivalent of $365 million at Chiba-gin Asset Management Co.
Based on first-quarter results, every 1 yen gain against the dollar reduces Toyota's operating profit by about 30 billion yen ($330 million), while Honda estimates every 1 yen gain cuts operating profit by 12 billion yen.
"If we can expect the yen to be strong for a long period of time, we may have to see if we need to shift what we are exporting from Japan to local production," Honda's Ito said. The automaker said yesterday it may start building its Fit compact car in the U.S.
