U.S. AUTOMAKERS NOTE CHALLENGES IN JAPAN

UNCLAS SECTION 01 OF 02 TOKYO 001456 SIPDIS STATE FOR EAP/J STATE PASS USTR FOR AUSTR CUTLER AND MBEEMAN PASS COMMERCE FOR K. ROTH AND D. BARZDUKAS E.O. 12958: N/A TAGS: ECON ETRD PGOV JA SUBJECT: U.S. AUTOMAKERS NOTE CHALLENGES IN JAPAN ¶1. Summary: Members of the American Chamber of Commerce of Japan's Automotive Committee, representing GM, Ford, and Chrysler, told the country team during the monthly meeting with the ACCJ Board of Governors that they face several non-tariff imports of U.S. manufactured vehicles. Particular problems the three Detroit automakers cited include differing requirements for fuel efficiency and emissions between the U.S. and Japan and Japan's adoption of UN ECE regulations on safety, as well as the complexities of Japan's tax system, e.g., a new law to encourage the purchase of more energy efficient cars. While the market for imported cars remains small in Japan, normally about 250,000 imported vehicles are sold here annually, German manufacturers traditionally account for about three-fourths of that total. End Summary. Overall Operating Environment -------------- ¶2. Representatives from GM, Ford and Chrysler, representing the American Auto Industry of the American Chamber of Commerce in Japan (ACCJ) used the monthly ACCJ Board of Governors meeting with the country team to brief on the current market for U.S. autos in Japan. The three described the Japanese market as highly competitive, in particular in advanced technology (both basic and applied research). Importers' share of the Japanese market is miniscule and shrinking. Out of about 4.5 million vehicles sold in Japan, American automakers sold only 192,317 units in 2008 compared to an average of 250,000 vehicles annually before the global financial crisis. The U.S. auto companies constitute just over 6 percent of total imports; most are German makes. Standards -------------- ¶3. Japanese automakers, particularly Toyota with 40 percent share of Japan's domestic market, have the ability to influence global regulation and de facto standard setting, the auto representatives said. Many Japanese standards and regulations closely align with those in the EU and several other countries, including China -- but not those in the U.S. This situation poses enormous challenges for U.S. automakers in Japan. For example, certain U.S. imports are more fuel efficient than Japanese domestic brands, but are "disqualified" from receiving incentive-based benefits under Japanese regulation due to weight/size ratios that do not conform to local specifications). American automakers in Japan want "regulatory harmonization" between Japan and the U.S., and fair and transparent rulemaking. Non-Tariff Barriers -------------- ¶4. Although Japan has imposed no tariffs on automobile imports since 1978, non-tariff barriers abound, the U.S. auto representatives noted. Japan maintains different emission and fuel efficiency requirements from the EU and U.S. Safety standards such as those for side impact collisions (i.e., PedPro) track with requirements in the EU but not the U.S. GM wants the GOJ to delay PedPro for one year to align with the timing for when the UN's Global Technical Regulations (GTR) for wheeled vehicles come into effect. Taxation -------------- ¶5. Japan maintains nine different taxes for autos and the system begs for simplification, the representatives of the three auto makers reported. "Temporary Tax Rates" have been around since 1973 to fund automotive and road-specific infrastructure projects. The ACCJ strongly urges the GOJ to undertake a comprehensive review of automotive taxation and to abolish the following measures: 1) the Automobile Acquisition Tax, a special-purpose tax for road maintenance and construction; and 2) the Tonnage Tax, used to develop and maintain public roads. The Japan Automobile Manufacturers Association (JAMA),Japan Automobile Importers Association (JAIA),Keidanren, and other business organizations are pursuing similar objectives. The U.S. automakers have also voiced concerns to the GOJ about the ineligibility of their vehicles to qualify for recently announced green tax incentives. Certification TOKYO 00001456 002 OF 002 -------------- ¶6. The U.S. automakers are also seeking certification of hydrogen tanks used on fuel cell test vehicles. The process, however, is complex, lacks transparency, and involves multiple GOJ agencies. Moreover, U.S. automakers are developing advanced technology vehicles, which can be tested with relative ease in the U.S. and the EU on public roads, but not, because of regulations here, in Japan. ¶7. A further problem the companies raised is that Japanese safety certifications often require slightly different tests than in the U.S. Ford has told emboffs it takes about 12 hours to rework each of their vehicles to meet Japanese standards. Chrysler noted Japan maintains a different philosophy about certification: whereas in the U.S, automakers certify vehicles based on government standards and take responsibility for auto recalls, if necessary, the GOJ certifies vehicles and Japanese automakers expect the government to take responsibility in the event of a recall. ZUMWALT