It's something that has bothered numerous U.S. leaders for decades: Why do American automakers struggle to gain a foothold in the world's third-largest auto market, Japan? Recently, President Donald Trump opened up this conversation yet again on his 12-day-long Asia-Pacific trip. He referenced the massive trade deficit the U.S. holds with Japan, which hovers around $69 billion as of last year.
On Monday, The Atlantic dove into the problem U.S. automakers have with Japan, and it's not so much protectionist policies or a multi-layered supply chain that makes it so difficult—it's the dealerships and service.
According to the U.S. Department of Commerce, $52.6 billion of the U.S.-Japan trade deficit comes from cars and vehicle parts. If American automakers could sell more vehicles in the country, it would have a major effect on the trade deficit. However, to gain an edge, U.S. automakers must make investments in its dealer networks to match the grand dealer networks its Japanese rivals have.
Purchasing a car in Japan is quite different than in North America. As the report points out, the local dealer calls potential customers, brings demo cars to residences, and provides local test drives. Following a purchase, the dealership handles insurance and builds great rapport with the customer.
American brands do not offer near the same service in Japan, a country where hospitality means more than a quick in-and-out deal. BMW, specifically, learned this and redoubled efforts in the Japanese market to sway consumers. It now offers a separate coffee shop just for patrons, and a product "genius," not a salesperson, is on site to help potential customers. Dealers also hold weekend events for children—such as remote-controlled car races—and the sites even boast a "delivery bay" for a customer delivery ceremony, should he or she choose.
Yes, other facets, such as the country's infrastructure, historical context, and emission regulations, may give American automakers an upfront disadvantage, but it's hardly protectionism that's the problem. Heck, Japan doesn't even levy taxes on imported cars. It's service at the end of the day, and the numbers prove it. After BMW invested in hospitality, sales rose 23 percent over a four-year period. Cadillac? It sold less than 1,000 cars in Japan in 2016.