[Source/Observer Network by Pan Yuchen, edited by Gao Shen] On April 2nd, the United States officially imposed a 25% tariff on all imported cars. For Japan, a traditional ally of the U.S., this will be a heavy blow, and its impact may surpass other major automotive regions such as China and Europe.
Backed by the "Golden Age" of Mexico
Due to the relatively small size of the Japanese car market, the North American market has long been considered the main sales area for Japanese automakers. The core competitiveness driving their sales lies in the reliability and cost-effectiveness of their economical vehicles.
According to Reuters, one reason why Japanese automakers can offer economical vehicles compared to domestic U.S. automakers like General Motors and Ford is their low-cost production rooted in Mexico.
As early as 1966, Nissan opened the first automobile factory overseas in Mexico. Toyota, Honda, and Mazda followed suit shortly thereafter. By contrast, it was not until 1983 that Nissan established its first factory in Tennessee, USA.
Nissan dealers in the U.S., Reuters
According to data from the Mexican National Institute of Statistics, last year, Japan's major automakers exported nearly 880,000 vehicles through Mexico to the U.S. Among these, Nissan accounted for about 330,000 exports, the largest share among Japanese automakers, exceeding one-third. According to S&P Global Mobility data, approximately 27% of Nissan's sales in the U.S. come from Mexico, while the respective figures for Honda and Toyota are 13% and 8%.
Additionally, according to International Monetary Fund data, in 1966 when Nissan established its factory, Mexico's exports to the U.S. amounted to $824 million, ranking sixth; however, thanks to the global auto industry including Japanese brands, Mexico is now the largest exporter to the U.S., with total exports reaching $476 billion in 2023.
Business Model Overturned
However, U.S. President Trump is now overturning this business model. Industry experts said that automakers may have to raise prices due to tariffs, and consumers sensitive to price changes will be particularly affected.
Koji Endo, head of stock research at SBI Securities, stated: "Automakers choose to produce cars in Mexico due to low costs. Moreover, most of the models produced there are economical vehicles with limited profit margins; even if prices increase, it can only be by a small margin."
James Hong, head of Macquarie Mobility Research, pointed out that since tariffs are calculated based on vehicle transfer prices rather than retail prices, if the full cost of tariffs is passed on to consumers, it would amount to a 20% increase, which is a significant impact for budget-conscious buyers already grappling with inflation.
Taking Nissan as an example, due to outdated lineup and lack of hybrid models, Nissan has struggled in the U.S. It is worth noting that Ivan Espinosa, the new CEO of Nissan who is 46 years old and from Mexico, mentioned last week that Nissan has prepared several contingency plans, which can be implemented once the tariff policy is clarified.
New Nissan CEO Espinosa, Nissan
However, like Nissan and Toyota, Honda has not issued clear strategies but mentioned considering reducing cross-border supply in North America. If the U.S. maintains its tariff strength for a long time, they may restructure their production networks and supply chains.
However, James Hong also emphasized that most automakers cannot relocate production from Mexico to the U.S. because they currently lack spare capacity in the U.S.
Global Landscape Further Compromised
Once U.S. tariffs affect the actual competitiveness of Japanese automakers in the North American market, it means that Japanese automakers will lose their final stronghold globally.
In the world's largest automotive market, China, facing a comprehensive offensive from自主品牌 smart electric vehicles, Japanese automakers' sales are facing a full-scale decline: Toyota sold 1.776 million units in China in 2024, a year-on-year decrease of 6.9%; Honda's annual sales were 852,000 units, a year-on-year decrease of 30.9%, and it is the lowest record since 2014; Nissan's annual sales were 696,000 units, a year-on-year decrease of 12.2%, and it is the lowest level since 2008. Data from the China Passenger Car Association shows that the market share of Japanese cars in China fell to 11% in 2024, down 13 percentage points from its peak four years ago.
In Southeast Asia, Japanese automakers once dominated the market due to their early entry in the 1970s and achieved localization early on. Therefore, Japanese automakers maintained a market share of over 80% in countries like Thailand and Indonesia, reaching as high as 90% in Indonesia. However, with the entry of Chinese new energy vehicles, the market share of Japanese cars in Southeast Asia is gradually declining. According to Bloomberg statistics, from 2019 to 2024, the market shares of Japanese automakers in Singapore, Thailand, Malaysia, and Indonesia decreased by 18, 12, 4.9, and 6.1 percentage points respectively, with Japanese car shares dropping to 35% in Thailand and Singapore.
Cars waiting for export in Kawasaki, Japan, Visual China
In the European market, Japanese automakers faced tariff pressures as early as the 1960s and 1970s, forcing them to establish local factories in the 1980s or enter the market through alliances with European automakers (such as the Renault-Nissan-Mitsubishi Alliance). Even so, in the face of strong domestic automakers, Japanese automakers maintain a low market share in Europe.
In India, the Middle East, South America, and other markets in the global south, the market share of Japanese cars ranges from 20% to 40%. However, Chinese new energy vehicles are also concentrating efforts on the Middle Eastern and South American markets, further eroding the competitiveness of Japanese cars.
Statistics show that in 1998, Japanese car production exceeded 20% of the global total, while China's car production accounted for less than 2%. Now, China's car production accounts for nearly 40% of the global total, while Japan's car production accounts for less than 12%.
With the full arrival of U.S. tariffs, the market landscape for Japanese automakers will worsen further. According to Goldman Sachs estimates, related price increases due to tariffs will further severely impact Japanese automakers' sales and operating profits this year. Mazda may be hit the hardest - with a profit drop of 59%; Nissan follows closely behind, expected to drop by 56%; Toyota and Honda are expected to fall by 6% and 8%, respectively.
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