BMW’s Japan CEO Reveals The Country’s True Non-Tariff Barriers – Forbes
“This is BMW Group’s sixth-largest market, by volume.”
I consider where we are, and my jaw drops. We are in Tokyo, Japan, and we are talking to Peter Kronschnabl, President of BMW Group Japan. Would we be talking to President Trump, or to Ford, we would be told that Japan is closed to foreign cars. Kronschnabl finds the assertion literally laughable: I prod him where Japan ranks at BMW in terms of profits, and Kronschnabl just smiles.
“The Japanese customer wants a well-equipped car. No car is sold at list here.” At BMW, the global ranking goes China, U.S.A., Germany, UK, Italy, Japan, by volume. By profit, take out one country, which one is a company secret. This leads to a nice long chat, and in its course, I learn where the true barriers to entry are buried.
I meet Kronschnabl at BMW’s sprawling complex in Odaiba, an artificial island in Tokyo Bay, and ground zero of the 2020 Tokyo Olympics. In the Edo Period, coastal batteries were placed here to blow hostile foreign ships out of the water. It didn’t work. Now, Odaiba is BMW’s strategic base to roll-up the Japanese car market. A whole 6.5 acre block is filled with flagship showrooms for BMW and Mini. There are 100 BMWs for test drives. There is space for a handling course, complete with a wet skidpad to train evasive driving. The only thing that’s missing is Rolls-Royce. Their showroom is elsewhere, to keep the exalted Roller clientele from rubbing shoulders with buyers of lowly 12-cylinder 7-series BMWs.
In Odaiba, BMW sits in the lion’s den of driver experiences. Toyota’s Megaweb City Showcase looms on the other side of the highway. For futuristic inspiration, Tokyo’s Miraikan Future Museum is caddy-corner across the street. I learn that I am in one of two of BMW’s global model showrooms. Corporate spies who want to know what corporate identity and showroom concepts BMW will introduce in 2018, should aim their satellite here (Google earth is woefully behind.) BMW is all white with black lettering. Mini is all black with white letters. Brand separation baked to perfection. Cost to build: $37 million.
The podium of import cars in Japan is firmly in German hands. BMW Group brought 75,700 cars into the country last year, and it relegated Daimler to place 3 with 72,000. (Kintaro Ueno, CEO of Mercedes-Benz Japan, declined a request to be interviewed.) Volkswagen Group still leads the pack with 83,500, but it has seen better days. BMW also sold 4,800 motorcycles in Japan. “If I put all the BMW Group products together, we roughly sold 80,000 last year,” says Kronschnabl, and the colleagues in Wolfsburg won’t be happy to hear that. 67% of the 343,673 foreign cars registered in the allegedly closed market Japan last year are from the three Germans, or the “G3,” as they are called by Japanese OEMs. The rest is mostly in other European hands. Americans? Never mind. Japanese buy more Ferraris, or Maseratis, than Chevys.
We stroll through BMW’s vast Tokyo complex, and it clearly is not the operation one would expect in a market closed to imports. Listening to Kronschnabl, the closed market trope quickly becomes fake old news. “I have been in Japan for 2 and a half years now,” Kronschnabl says, in English, with only the slightest hint of a German accent, “and I never had issues bringing cars to Japan, none.” Did his predecessors complain about chicanery by Japanese officials? “Not that I would know.” No wonder: We are in a paradise for car importers. Zero percent customs on cars (U.S.A. 2.5%.) Zero percent customs on light trucks (U.S.A. 2.5% plus 25%.) But what about those non-tariff barriers?
The cost of “federalizing” a car for importation to America easily can go into the double digit millions. I ask what it costs in Japan. “You mean the filing fee?” No, total internal costs. Herr Kronschnabl, usually a walking data dispenser, for the first time doesn’t have a number. “Homologation is no big worry for us in Japan,” he says.