The Japanese automotive industry ranks second globally and produces over 10 million vehicles annually. It presents opportunities for foreign firms providing innovative technologies. Japanese automakers develop advanced technologies and source over 70% of parts domestically or through foreign suppliers. Key automotive parts in demand include radiators, pistons, wiring harnesses, and transmissions. Foreign parts suppliers have found success by localizing production and closely collaborating with Japanese automakers. The industry faces pressures for cost reductions, environmental technologies, and optimization of global supply chains.

1. Automotive
& Supplier
Automotive
& Supplier
Japan Market Reports 2008
Partner in Japan
G&S International Japan
6-4-13 Soshigaya, Tokyo
Setagaya-ku 157-0072 Japan
Web www.gs-int-ltd.com
© G&S International Japan 2008. All rights reserved.

2. Automotive
Contents
& Supplier
1) The Japanese car industry – Big in Japan? page 3
2) What drives the Japanese car? page 4
3) Level of industry output & main production places? page 5
4) Where are the main locations of the Japanese car industry? page 6
5) Automobile parts purchased from EU & U.S. – Big business? page 7
6) Distribution structure for automobile parts in Japan? page 8
7) What is the transaction flow for auto parts in Japan? page 9
8) Market Trends for Individual Assembly Parts? page 10
9) How have foreign parts makers entered the JP market in the past? page 11
10) Success stories market entry Japan page 12
11) Recent changes in the Japanese auto supplier industry? page 13
12) Few key points in regards to Japanese customers page 14
G&S International Japan services overview page 15
© G&S International Japan 2008. All rights reserved.
2

3. Automotive
The Japanese automotive industry ranks second in the world, closely behind that of the United
States and well ahead of those of other nations with over 10.9 million vehicles produced in
& Supplier
2007. Japanese automakers and parts manufacturers continue to develop many of the industry’s
most innovative features, presenting significant business opportunities for foreign firms with
applicable products and technologies.
Japan – the second biggest automotive market worldwide
Market Focus: Global Partnerships
Foreign companies entering the Japanese automotive market
will find a strong domestic consumer base that purchases some
6 million vehicles each year. In addition, Japanese automakers
produced 4.96 million vehicles for export in 2004. Foreign
companies in Japan not only benefit from strong domestic sales
and exports but also the ability to leverage the global reach of
Japanese automakers and parts manufacturers.
Furthermore, Japanese companies have broken away from the
practice of doing business with companies simply because they
are part of a close association of affiliated companies, or
keiretsu.
Instead, Japanese companies are optimizing their supply
networks by choosing to work with companies from around the
world that offer parts superior in cost, technology and quality.
© G&S International Japan 2008. All rights reserved.
3

4. Automotive
& Supplier
Intelligent Driving
Japanese automakers are integrating more telematics products and services into automobiles
to make driving more convenient and pleasurable, opening doors for innovative foreign companies.
Environment
A growing emphasis on environmental sustainability is generating opportunities for automotive
companies whose technologies help reduce the automobile’s impact on the environment.
Safety
Consumer demand for increased automotive safety features provides great opportunities for
foreign firms as Japan’s automotive manufacturers shift their focus from reducing damage
resulting from accidents to preventing the accidents all together.
Added Value
As more electronic and information device parts are Integrated into automobiles, foreign
companies in related fields can expect to find growing demand for their business in Japan.
© G&S International Japan 2008. All rights reserved.
4

5. Automobile Production of Top 5 Countries 2006
Automotive
& Supplier
Japanese Car Maker's
main R&D locations
Known for their quality and innovation, Japanese
automakers continue to develop many of the industry’s
most advanced technologies that are later seen around the
world, presenting significant partnership opportunities for
foreign firms expanding to Japan to leverage Japan's
automotive industry and sell to the global market.
2007: “Japan’s car
industry is picking
up again!“
Japanese car
production, sales,
exports
Source: JAMA
© G&S International Japan 2008. All rights reserved.
5

6. The Japanese automotive industry ranks second in the world, closely behind that of the United States and
well ahead of those of other nations with over 10.9 million vehicles produced in 2007. Japanese
automakers and parts manufacturers continue to develop many of the industry’s most innovative
features, presenting significant business opportunities for foreign firms with applicable products and
technologies.
Automotive
& Supplier
Manufacture of
Transportation
Equipment
(1)Aichi
(2)Gunma
(3)Shizuoka
(4)Mie
(5)Fukuoka
Motor vehicles parts
and accessories
(1) Aichi TOKYO
(2) Shizuoka
(3) Gunma
(4) Kanagawa
(5) Saitama
Source: Ministry of
Economy, Trade and
Industry, 2006
© G&S International Japan 2008. All rights reserved.
6

7. • Japan is No.1 purchasing industry for auto parts from the U.S. and EU
• the trend for foreign imports of quality car parts is stable and expected
to slightly increase over the next 5 years
• many foreign parts suppliers experience growing business globally, if Automotive
successful business can be made with Japanese car makers in Japan
• many Japanese auto-makers appreciate the high quality and innovative
solutions developed by foreign suppliers, especially from Germany
& Supplier
© G&S International Japan 2008. All rights reserved.
7

8. The structure of the automobile industry resembles a pyramid, with the automobile manufacturers at
its apex and the frame manufacturers who assemble the car bodies and the parts manufacturers
below. As many as 20 to 30 thousand parts are required to construct a single automobile; however,
automobile manufacturers only manufacture around 30% of these in-house, and the majority are
manufactured by automobile parts manufacturers. Automotive
& Supplier
Source: Ministry of Economy, Trade, and Industry
© G&S International Japan 2008. All rights reserved.
8

9. Automotive
& Supplier
© G&S International Japan 2008. All rights reserved.
9

10. Automotive
& Supplier
Besides many other interesting auto
part fields, a list-up of a few car
parts currently strong in demand by
Japan auto-makers >>> • Radiators
• Piston Rings
• Wiring Harnesses
• Headlights
• Transmissions
• Wheels
• Shock Absorbers
• Disc pads
• Fuel tanks
• Seatbelts
• Navigation Systems
© G&S International Japan 2008. All rights reserved.
10

11. Automotive
& Supplier
© G&S International Japan 2008. All rights reserved.
11

12. “Building close relations with Japanese companies is one key
to succeeding around the world.”
“Providing optimal products to
Japanese Automakers through
Automotive
localization is important …”
& Supplier
TMD Friction (Germany) is
the market leader as a
manufacturer of automobile
disk brakes pad and drum
The brake specialist works with
brake linings in Europe, and
auto manufacturers around the world
one of largest makers of
these car parts in the world.
Product requirements for brake components and other TMD products vary by market. High
performance is a must in Europe, where drivers accept noisier braking as a tradeoff for the power
needed to brake at high speeds, while Japanese drivers demand cleaner, quieter performance from
their brakes. For Japanese auto manufacturers, who market automobiles in regions with different
needs, TMD, with its comprehensive expertise, is an attractive business partner. Japanese users can
now take advantage of TMD Friction Japan K.K. to improve quality and efficiency through unified
procurement of brake materials and systems for every market.
The company enjoyed a 2% market share in Japan in its
first year of operation, and within four years hopes to see
its share climb to 10%. Mr. Yasuhiro Miyaji, who
succeeded Dr. Martius as president in August 2006, says
enthusiastically, "If we can ask our customers about all
their needs directly and respond to these needs,
(achieving 10%) is no fantasy."
© G&S International Japan 2008. All rights reserved.
12

13. Automotive
& Supplier
Throughout the era of high economic growth, the Japanese automobile parts industry grew
consistently. However, the auto growth has slowed down globally, competition in the industry is
intensifying worldwide. The transition engulfing the automobile parts manufacturing industry in
Japan can be characterized as follows:
• As Japanese automobile manufacturers expand their overseas manufacturing operations, they
demand that parts manufacturers have an overseas presence (many smaller Japanese parts
makers can’t provide that > increase in demand in foreign suppliers)
• As automobile manufacturers seek to optimize their supply chains, they more readily conduct
business with companies that do not belong to their (Japanese) conglomerates
• Environmentally friendly technology & Modularizationis much supported in Japan
• Demands for price reductions is expected to growing stronger
• Competition is intensifying as more foreign parts manufacturers enter the Japanese market
© G&S International Japan 2008. All rights reserved.
13

14. • Extreme focus on quality and on customer service (you will find the
biggest claim rate worldwide in Japan)
• Need to show long term committement to Japan
Automotive
• Excellent distribution and service network a must & Supplier
• Some adaption to the Japanese market often required
• Extreme need and request for technical information and
documentation
• Close and frequent communication to partner and customers
necessary to maintain well-working long-term relations
• Focus hard on hiring top people (a pool of very talented Japanese
are available if you screen carefully). Use recruiting agencies and
headhunters rather than printed or internet ads
• OK to take a premium price still, although the market is becoming
more competitive
© G&S International Japan 2008. All rights reserved.
14

15. G&S International Japan services overview
G&S International Japan are providing market entry and marketing/ sales for European
companies in Japan. The firm work with enterprises especially from Europe that do
object to start or expand their business operations in Japan.
Automotive
& Supplier
Professional Japan Business Development:
• market research & marketing intelligence
• sales partner sourcing & partner negotiation
• marketing & direct sales Japan
• logistics & import services Marketing
• e-commerce & web development
Solutions
• start-up coordination & turn-around management
• HR recruiting & interim management
• firm representation & PR management
Please contact us for more details on the Japanese auto & supplier market!
G&S
© G&S International Japan 2008. All rights reserved.
15