Will Japanese auto Industry Consolidate in the face of Chinese Competition?

There are currently 8 Japanese automakers who currently operate in international auto markets. Toyota, Honda, Nissan (part owned by Renault), Mazda, Mitsubishi, Subaru, Suzuki, Isuzu.

Unlike German Automakers, most of which operate in premium or luxury segments except Volkswagen, Japanese automakers primarily operate in bread and butter mass market segments. Although Toyota, Honda and Nissan have their luxury divisions Lexus, Acura and Infiniti, they do not have the global presence as the German brands.

Therefore, as Indian and Chinese automakers enter in increasing force in global markets, Japanese automakers will either have to face retirement or consolidate.

Toyota, Honda and Nissan have already done a decent job by globalizing their brands and presence in major markets such as North America, latin America, Europe and Asia.

Suzuki is in the process of expanding globally and it remains to be seen whether it will survive globalization. Much of it depends on whether it is able to remain a dominant player in Indian auto market or will other automakers including Indian origin TATA and Korean Hyundai as well as Ford are able to muscle out Suzuki from the Indian market.

Mitsubishi and Isuzu are not doing well in any market outside Japan and it is likely they will be the first to seek mergers with a larger automaker or see themselves retire.

Mazda and Subaru are both niche car makers, with Mazda emphasizing its distinctive sporty nature and radical engine technologies such as Wankel rotary engine, and Subaru marketing itself as an all wheel drive and safety specialist.

However, outside North America and Japan, Mazda and Subaru do not have strong brand recognition or market share.

In an ideal case, all Japanese automakers have the potential to do well, but in worst case, Japanese automakers might consolidate from 8 to eventually three, namely Toyota (may absorb Subaru), Honda, and Nissan. Suzuki, Mitsubishi, Isuzu and Mazda might retire or get absorbed by Chinese, Indian or other Japanese automakers.