Strong yen challenges Japanese carmakers’ technological advantage image

The Tokyo Motor Show is the perfect venue for Japanese automakers to showcase futuristic concepts such as rechargeable sports cars and car-powered houses.

However, the strong yen is affecting the industry and is threatening its chances to keep the lead in next-generation technology. Green cars like EVs and fuel-cell vehicles are joined in Tokyo by innovative concepts like cars acting as power sources for homes. After the March 11 earthquake and tsunami in Japan that left millions of households without electricity, the idea of capturing solar power or cheaper nighttime electricity in cars to power households has become more and more popular in the country.

This kind of ideas is endangered however by the strong yen, which has eroded Japanese automakers’ profits in their home market, while making them uncompetitive overseas against rivals like Hyundai and Volkswagen.

“The biggest worry I have right now is, yes, Japanese automakers have a lot of excellence in technology and manufacturing, but will they keep that excellence?” Christopher Richter, an auto analyst at CLSA Asia-Pacific Markets, was quoted by Bloomberg.

“Building new technology requires money. If you’re cash-starved, your global competitors aren’t going to cut you any slack from the difficulties in Japan. If Japanese automakers don’t change, there’s going to be a slow erosion of competitive advantage which they can ill-afford,” Richter added.