Honda is limiting exports to the U.S. of some Japan-made cars because it’s losing money on them, Honda CFO Fumihiko Ike told Automotive News.
The weekly trade journal reports Ike’s comments and says this is the first admission by a Japanese car company that it’s losing money on exports to the U.S. The issue is the dollar’s weakness vs. the yen, which cuts the value of a U.S. sale.
“Under the current exchange rate of 80 yen per dollar, our export business doesn’t make any profit,” Ike told Automotive News. “Definitely, the absolute number of exports to the United States will be decreasing.”
The exchange issue is why foreign automakers, including Honda, have aggressively expanded production plants in the U.S. in recent years, as well as other operations, from design studios to proving grounds. Vehicles built where they are sold escape the foreign-exchange trap, because the costs and sales revenue are in the same currency.
Honda already makes almost 90% of the vehicles it sells here at North American plants. It’s building another one in Mexico and expanding production in other U.S. factories.
U.S.-market Hondas made in Japan and possibly in low supply include the Fit subcompact, Insight hybrid, CR-Z hybrid, Civic hybrid and Acura TSX.
Ike said Honda will move more hybrid production to North America “within a few years.”
Toyota and Nissan wouldn’t say if they, too, lose money on cars shipped to the U.S., but both noted they are shifting production to North America.
“We’re focused on localizing,” producing here 85% of vehicles sold here by the end of next year, up from 70%, said Nissan’s U.S. spokesman, David Reuter. The Rogue SUV, for example, now is made in Japan but will be built at Smyrna, Tenn., next summer.
Toyota builds in North America 72.5% of the vehicles it sells here. “Our executives say we don’t want knee-jerk reactions, but the long-term goal is to build them where we sell them,” said U.S. spokesman Mike Michels. “That insulates us to a greater extent” from currency issues.
Honda will continue to ship some money-losers to the U.S. because, “We need to keep our customer base,” Ike said, and “for the sake of our dealers. At least they have something.”
Honda’s U.S. officials hinted at the problem recently in explaining low sales of the redone Insight hybrid, saying it was due to fewer to sell, not low appeal. There are more profitable markets elsewhere for Insight, Honda said.