For three decades Japanese auto producers, supported by the Japanese government, deployed with extraordinary success market and nonmarket strategies to access the small and fragmented but rapidly growing car markets of Southeast Asia. The last half-decade has presented a series of unexpected challenges, including extended recession and financial reform in Japan; the lingering effects of the financial crisis in Southeast Asia; and the entry of new competitors from South Korea, North America, and Europe. These pressures have split the industry into two. Leaders Toyota and Honda have defended and extended traditional Japanese production networks. Weaker players such as Nissan, Mitsubishi, and Suzuki have accepted subordination to the leading western firms, which are rationalizing their Japanese partners and using them to enter Japan and other Asian markets. This article explores production, trade, and investment data, industrial policies toward autos in Japan and Southeast Asia, and brief case studies of Toyota and Nissan to illustrate the challenges to, and varying responses of, Japanese auto producers in developing Asia. These firms remain committed to Southeast Asia, but the days of Japanese dominance are drawing to a close.
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