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
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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
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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
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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
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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


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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