ar market in the United States. The Japanese luxury car entries were initially in the mid range of the luxury car segment. By 1991, however, the Japanese manufacturers had also introduced models for both the low end and the high end of the luxury car market.
The importance of this study does not lie in the assessment of the effectiveness of the efforts of the Japanese manufacturers during the first two years of their attempts to penetrate the American luxury car market. Rather, the importance lies in the relation of these attempts to Japanese successes in penetrating other segments of the American new car market, and assessing the probability that they will achieve comparable results in the luxury segment of the market.
Effective Japanese competition in the luxury segment of the American new car market will erode margins in this segment, as a consequence of significant price competition. Experience over the past 20 years has demonstrated that American automobile manufacturers suffer from reduced margins to a much greater extent than do Japanese manufacturers. With a combined 66 percent market share in 1990, American automobile manufacturers posted record combined operating losses (Leach, 1991). The luxury segment of the American new car market, which accounts for approximately ten percent of total new car sales, is the high profit (per unit) segment of the industry. Significant price competition in this segment would be harmful to all American luxury car manufacturers, and would probably be fatal to Chrysler.
The implications of Japanese success in penetrating the luxury car segment cover a wide range of possibilities. American manufacturers could become competitive by improving productivity and design. In competing with the Japanese in other segments of the new car market, however, American manufacturers have just complained that they cannot meet the Japanese standards, and, in turn, asked the federal government ...