Japanese Cars' Big Road Trip

Riffing on the old saying that "if you can't beat 'em, join 'em," Japan's automakers are branching out and setting up shop in their target markets across the globe. Call it an "if you don't want to get hit with tariffs and high shipping costs, invest in your target market" policy. (I know. It's not nearly as catchy.)

The latest news on this front came from Toyota (NYSE: TM  ) , which on Tuesday confirmed a story that first broke in November of last year: It's building a $144 million car factory in St. Petersburg, Russia, or, more specifically, in the neighboring Leningrad regional town of Shushary. Commercial production is expected to begin by late 2007, and once it gets up to speed, the factory should be able to produce as many as 50,000 cars per year.

While media reports state that Toyota intends to produce cars for the Russian domestic market, the company has stated that it anticipates producing primarily Camrys at the new factory. For that reason, I continue to believe that Toyota will be producing at least in part for export from Russia to the more lucrative West European market. My reasoning: The Camry may be considered basic transportation in the U.S. at $18,000 and up, but it sells for well over twice the average new car price prevalent in Russia and is far out of reach of the average car buyer.

Meanwhile, a bit to the south, Toyota rival Honda (NYSE: HMC  ) announced on Monday that it will be opening its own plant in Turkey. That factory will focus on producing subcompact "City" sedans, which are even smaller than the company's well-known Civic model sold in the United States. Tiny (and cheap) cars like the City should sell well in Turkey, a country where Honda is experiencing explosive sales growth. Honda also intends to use its Turkey plant as a base of operations for sales into Europe -- in this case, Eastern Europe, where the City's low prices should be a big draw.

Third, and finally, comes Nissan (Nasdaq: NSANY  ) , or, technically, its automaking partner Renault. The two companies own sizeable interests in each other and, as of next week, will also share a CEO. Earlier this month, Renault announced that it has sunk a quarter billion dollars into a plant in Moscow. The plant is expected to begin producing "Logan" model sedans, a budget car sharing a common platform with the Nissan Micra. The plant should ramp up to commercial production levels by late summer of this year.

With all their growth -- both prospective and ongoing -- Japan's automakers are priced for success relative to their U.S. rivals. Read all about it in "Pick a Car Company. Any Car Company."

Fool contributor Rich Smith has no position in any of the companies mentioned in this article.


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