Japan car makers shuffle output, boost imports to meet U.S. SUV demand

Honda Motor Co Ltd presents their new SUV model "WRV" during the Sao Paulo International Motor Show in Sao Paulo, Brazil, November 8, 2016. REUTERS/Paulo Whitaker

By Naomi Tajitsu and Maki Shiraki TOKYO/MARYSVILLE (Reuters) - Japan's top automakers are shuffling their U.S. product portfolios and resorting to larger imports of popular models there as they scramble to meet booming demand for gas-guzzling SUVs and trucks in the world's No. 2 auto market. Honda Motor Co <7267.T>, Japan's third-largest automaker, said it will begin producing from early next year the Acura MDX SUV at its plant in East Liberty, Ohio, adding to production at its Alabama plant, which also makes its Pilot SUV, Ridgeline pick-up truck and Odyssey minivan. Honda, Toyota Motor Corp <7203.T> and Nissan Motor Co <7201.T> are all trying to maximize production efficiency at their North American plants to squeeze out more SUVs, but Toyota and Nissan have been importing a large number of SUV models to make up for the production shortfall, and Honda may do the same. "It takes time for manufacturing to catch up to these shifts because automakers are committing to changing their portfolio. It's not something you can do quickly," said Rebecca Lindland, senior analyst for automotive research company Kelley Blue Book. Imports allow car makers to sell more cars in a region without raising local production capacity, but they also can increase foreign exchange risks. Historically low U.S. gasoline prices and cost-conscious consumers seeking multi-tasking vehicles have boosted sales of SUVs, particularly smaller crossover models, and trucks, denting demand for traditionally sought-after passenger cars. Currently, 59 percent of all new vehicles sold in the U.S. market are light trucks, versus 41 percent passenger cars, compared with 55 percent and 45 percent, respectively, a year ago, according to Autodata figures. In contrast, the balance of U.S. vehicle sales at each of Japan's top three automakers is roughly even, suggesting that while they are producing more vehicles, the model mix of their sales is lagging market trends. Honda is responding by expanding production capacity for its CR-V SUV model in the United States. Another option is importing the CR-V, along with the popular Civic, from Japan, a company spokeswoman said. "While maintaining our current overall capacity (in North America), we'd like to also consider our production options in Japan ... to produce more light trucks to respond to strong demand," American Honda Motor Co CEO Toshiaki Mikoshiba said. The Japanese are not alone in trying to adapt to the demand shifts. South Korea's Hyundai Motor Co <005380.KS> has been producing its Santa Fe Sport model at its Alabama plant since June to increase supply of the SUV while sales of its mainstay sedans such as the Sonata stagnate. SALES FORECASTS CUT Both Honda and Toyota recently cited a less competitive product mix as a reason for trimming their respective annual North American vehicle sales forecasts. Toyota will increase production capacity of its Tacoma pick-up truck at its plant in Mexico by more than 60,000 to an annual 160,000 by 2018 while it is also looking to its upcoming C-HR crossover model to lift sales in the segment. In the meantime, total Japanese exports of Toyota's popular RAV4 model to the United States rose 20 percent in January-September from a year ago, even as the model's production at its plant in Canada has increased by 3 percent over the same period. Nissan has ramped up exports of its Rogue crossover from Japan to North America by 27 percent to 56,000 units in the April-September period from a year ago, while it also exports a large number of Rogues from South Korea. Japan's No. 2 automaker in August moved production of its Armada SUV from its plant in Mississippi to Japan to make room to make more Titan pick-up trucks and Murano SUVs. In April-September it sent 8,000 Armadas to North America. Toyota, Nissan and Honda all anticipate that the rampant growth in the U.S. market may slow going forward, and Lindland at Kelley Blue Book said that flexible production capabilities, rather than more capacity, was key to keeping pace with demand. "I wouldn't recommend adding new plants because the market is plateauing," she said. "There's a fine line between having enough inventory and over building." (Reporting by Naomi Tajitsu and Maki Shiraki; Editing by Muralikumar Anantharaman)