Luxury Imports Rev Up in Japan. European luxury cars gain a growing following among the upwardly mobile

IF you are young and trendy in Tokyo these days, the ``in'' thing to have is a suntan on the left side of your face. In Japan, where people drive on the left, that's proof you've been driving a foreign car. Owning an imported car has become so fashionable that, in certain upscale neighborhoods here, Mercedes sedans are more ubiquitous than Toyotas.

``What we are selling actually here is a life-style product,'' says Luder Paysen, the president of BMW Japan. For his Japanese customers, the German luxury car ``is a symbol of individuality and success,'' he says.

The desire to be different is just one factor behind the growing success of foreign automakers in the past few years in penetrating what was once a virtually closed market. In 1983, the Japanese bought only 35,286 car imports. Sales started rising to a high of 133,583 in 1988.

The winners in this new market are mostly European companies, led by Volkswagen (the largest seller), BMW, Mercedes-Benz, Audi, Volvo, and others. United States companies have been slow to see the opportunity. But their sales, too, have started to increase, led by Ford's Taurus.

Still, even the most successful entries caution against euphoria. The share of imports in the Japanese market has reached just 3.7 percent, compared to 29 percent, for example, in West Germany. Foreigners are still struggling, Mr. Paysen says, to overcome ``the burden of the past.''

The weak position of foreign manufacturers, Paysen argues, is due to three main reasons: trade barriers, a poor image among Japanese consumers, and a lack of commitment by foreign companies to sell in Japan.

From the early 1950s, the Japanese auto industry grew up behind a wall of protection. High tariffs discouraged imports while Japanese carmakers were encouraged to link up with European makers to gain technology and become more competitive. The tariffs began coming down when Japanese car companies showed they could export, but were not eliminated until 1978.

Even after that, nontariff barriers limited entry. Hurdles included inspection requirements and taxes that discriminated against larger cars.

With the implementation next month of the new Japanese tax reform, ``all the nontariff barriers are gone,'' Paysen says. But the Japanese consumer is left with an image of foreign cars as expensive, unreliable gas guzzlers, too big for narrow Japanese streets.

Japanese consumers had little reason not to buy their own product. Until recently, the only enthusiastic customers were said to be Japanese gangsters, who bought Cadillacs.

Lastly, says Paysen and others, foreign firms made little effort to change the situation. They had no interest in investing to market their cars in Japan. They were content to market a small number of cars through a few local importers who had limited, underfinanced sales operations.

So what brought the turnaround? The changing social environment is clearly a major element. Affluence and the urge to break from the group is driving an almost insatiable taste for luxury imports, including cars. The pressure on Japan to open its market has also helped. During the past four years, the Japanese government has pushed a major shift from an export-driven to a domestic-demand driven economy.

Government campaigns to ``import now'' have made a difference, Paysen observes.

A key part of the change has come from the rising affluence of the Japanese. ``The luxury car market in Japan is growing at an extraordinary pace,'' Paysen says. The boom in sales of Mercedes, BMW, Jaguar, and other high quality vehicles has compelled Japanese makers to bring out their own high-priced contenders, like Nissan's wide-body Cima, which costs more than $40,000.

The secret to success, however, was the readiness of certain European firms to invest heavily in getting into the market. BMW's case is cited as a model.

In 1981, most Japanese thought the name meant ``British Motor Works'' and the company sold about 3,500 cars through importers who handled other companies' cars. That year the German firm set up its own subsidiary to distribute and service its cars. It backed a growing network of exclusive dealers with a massive advertising and marketing campaign, the most expensive of all BMW subsidiaries worldwide.

Many Japanese came to appreciate the car for what they describe as its superior craftsmanship, performance, and engineering. The cost of a BMW also was reduced five times in the last seven years. Last year BMW sold almost 27,000 cars, making it the most profitable subsidiary the company has. The BMW example has been followed by others, such as Volkswagen and Jaguar, who set up their own sales networks.

American firms have begun selling their cars through dealers affiliated with Japanese auto makers they have ties with, such as Ford with Mazda.

Most foreign firms are optimistic about their prospects in Japan. The BMW head predicts that by 1995, traditional imports will have gained a 10 percent market share, about 400,000 cars. Also, he says, another 10 percent will go to re-imports of Japanese cars made in the US, which has already begun, and to cars from countries like Korea.

Japan is ``the toughest market, where customers are the most demanding,'' says Paysen. Success here is reflected in doing better in other markets, not to mention the value of keeping close tabs on what the Japanese are up to. ``If American makers compete in Japan,'' he politely suggests, ``their cars would become better.''