Touting lower personnel costs and a close proximity to South Korea, the Kyushu region is well on the road to becoming the next Japanese Detroit for domestic automakers.
With automakers sputtering due to the strong yen, all roads to their newest plants lead to this southwestern region, far from the major cities of Tokyo, Osaka and Nagoya.
A ceremony was held July 6 to celebrate the start of shipping of luxury-class vehicles for overseas markets at the Miyata Plant of Toyota Motor Kyushu Inc., a subsidiary of Toyota Motor Corp., in Miyawaka, Fukuoka Prefecture.
“Kyushu is reliable as it has become our second stronghold following the Chubu region (where Toyota is based),” Toyota Motor President Akio Toyoda said.
In the Miyata Plant, Toyota has begun to manufacture Lexus ES vehicles for export to the United States, China and other countries. The carmaker regards Kyushu as a production stronghold for its top-of-the-line Lexus vehicles.
Toyota Motor Kyushu plans to produce about 350,000 units in this fiscal year, up 50,000 from fiscal 2011.
Nissan Motor Co. halted one of the two production lines at its Oppama Plant in Yokosuka, Kanagawa Prefecture, in June. In exchange, it will transfer the production of its totally renovated compact car Note to its subsidiary Nissan Motor Kyushu Co. in Kanda, also in Fukuoka Prefecture.
In June, Nissan also transferred the production of its commercial vehicle Caravan from Kanagawa Prefecture to another subsidiary Nissan Shatai Kyushu Co., located next to Nissan Motor Kyushu.
When the transfer of Note production is completed, Kyushu will account for about half of Nissan’s entire production in Japan.
The numbers show that Japanese carmakers, led by heavyweights Toyota and Nissan, have been increasing their production in the Kyushu region in recent years.
The total number of cars produced in Kyushu in fiscal 2011 stood at 1.32 million units, up 21 percent from fiscal 2010. The growth rate was much larger than the national average of 3 percent.
In fiscal 2001, only 7 percent of the total number of cars produced in Japan were manufactured in Kyushu. However, the figure doubled to 14 percent in fiscal 2011.
In Kyushu, automobiles and other car-related products now account for about 15 percent of the region’s total shipment of industrial products. The figure is much higher than the 9 percent of electronics and other related products turned out in the region.
Car production is set to increase in Kyushu in fiscal 2012, which started in April this year. Because of that, some companies are increasing their number of employees.
With Japanese carmakers’ profits from exports decreasing due to the strong yen, they are trying to maintain their production base in Japan by shifting operations to Kyushu, where personnel costs are low.
For example, Toyota Motor Kyushu will increase its payroll by 300 employees during the period from late May to mid-July. Nissan Motor Kyushu also accepted 100 workers from Mitsubishi Motors Corp.’s Mizushima Plant in Kurashiki, Okayama Prefecture.
According to a survey of the Ministry of Health, Labor and Welfare, personnel costs in Kyushu are about 10 percent lower than in Aichi and Kanagawa prefectures, where there are many car factories.
In addition, equipment in those carmakers’ plants in Kyushu is relatively new. For example, Nissan Shatai Kyushu started operations in 2009. Toyota-affiliated Daihatsu Motor Kyushu Co. in Nakatsu, Oita Prefecture, was set up in 2004 with its production transferred from Maebashi in Gunma Prefecture. As their assembly line equipment is new, the production efficiency is high.
In addition, as Kyushu is geographically close to South Korea, it is easier to import cheap auto parts from there to reduce production costs.
Nissan is an especially active player in that field. For example, about 20 percent of parts for Nissan’s Caravan, except for key parts, are made in South Korea.
“Even if we use imported parts, we will maintain our factories in Japan,” said Toshiyuki Shiga, Nissan chief operating officer.
The decline in the value of the South Korean won is also helping Japanese carmakers’ push for imports of auto parts. In April, Toyota Motor Kyushu invited about 10 South Korean auto parts makers to Kyushu for the first time for business negotiations.
The governments of both Japan and South Korea are also trying to promote the import of auto parts from South Korea to Kyushu.
Currently, auto parts that are loaded onto tractor-trailer trucks in South Korea have to be transferred to different tractor-trailer trucks in ports in Kyushu. However, the two governments are jointly considering a way in which those auto parts can be transported directly from South Korea to plants in Kyushu. A demonstration test run is expected to start within this year.
Currently, tractor-trailer trucks with South Korean license plate numbers are not allowed to operate on public roads in Kyushu. If they were allowed to do so, it would not be necessary for the auto parts to be transferred to different trucks in ports in Kyushu, a savings in time and transportation costs.
There are many auto parts makers in and around the coastal city of Busan in the southern part of South Korea. Tractor-trailer trucks can visit several factories there, load their auto parts onto the vehicles and directly transport them to factories in Kyushu after being ferried across the Sea of Japan.
However, the import of inexpensive South Korean auto parts threatens Japanese auto parts makers in Kyushu.
“As our rivals increase, the price competition will become harder,” an official of one of the Japanese auto parts makers said.
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