Japanese Vehicle Sales Decline Slows in June to 14.5% Y/Y

The Japanese vehicle market continued its decline during June, according to data released by the Japan Automobile Dealers Association (JADA). During the month, the total number of vehicles sold in the country fell by 14.5% year-on-year (y/y) to 382,285 units, adding to the declines seen in earlier months; as a result, year-to-date (YTD) sales are now down 21.5% y/y at 2.187 million units. The number of vehicle sales in the traditional categories fell by 13.5% y/y in June to 243,342 units, meaning that YTD sales are down 26.4% y/y at 1,303,766 units. Sales in the traditional categories during the month and YTD, respectively, were split between 219,836 and 1,160,416 passenger cars (down 9.5% y/y and 25.1% y/y, respectively), 22,692 and 136,131 trucks (down 39.1% y/y and 36.2% y/y, respectively), and 814 and 7,219 buses (down 32.1% y/y and 17.2% y/y, respectively). Split by passenger car category, the small-size passenger car class—comprising vehicles with engines below 2.0 litres and a body width below 1.7 metres—was the worst affected by the downturn in the month as sales of such vehicles fell by a further 9.8% y/y to 119,027 units, taking the YTD decline to 676,785 units, down 20.3% y/y. Larger standard-sized passenger cars (comprising vehicles with an engine capacity above 2.0 litres) did not escape the downturn either, sales falling by 9.0% y/y during the month to 100,809 units, with the YTD decline standing at 31.0% y/y to 483,631 units.

As expected, almost all of the country's automakers were affected by the downturn during the month. Toyota, by far the largest-selling vehicle manufacturer in the country, saw its sales fall by 11.4% y/y to 110,677 units, while Nissan suffered a higher decline of 20.8% y/y to 38,844 units. However, third-placed Honda continued its growth for a third consecutive month, its sales rising by a further 5.7% y/y to 37,450 units. However, among the rest of the automakers, the sales pattern was uneven. Suzuki suffered the highest percentage decline for the month of 26.5% y/y to 5,275 units, while Mazda fared best among the remaining automakers as its sales fell by just 4.0% y/y to 13,580 units. Truck-makers bore the brunt of the decline, with many seeing sales falls of over 50% during the month.

The minivehicle segment struggled almost to the same extent as its larger counterparts in June, according to data released by the Japan Mini Vehicle Association. During the month, sales in this category fell by 16.2% y/y to 138,943 units, meaning that YTD sales were down by 13.0% y/y to 882,972 units. According to the breakdown of the data, passenger vehicle sales declined by 17.8% y/y to 99,550 units during the month and by 12.3% y/y to 683,599 units during the YTD. Commercial vehicle sales in this class fell by 11.6% y/y in the month and 15.3% y/y in the YTD, respectively, to 39,393 and 199,373 units. On a brand basis, nearly all automakers recorded declines of varying degrees in the month. Daihatsu retained its position as the largest-selling minivehicle manufacturer in Japan during June, posting a decline of 13.0% y/y to 49,858 units. Its YTD sales fell by 11.0% y/y to 305,879 units. Suzuki remained in second position during the month, despite posting a smaller decline of 9.7% y/y to 45,644 units. Its YTD sales also fell to 293,176 units. The largest percentage declines during the month were reported by Honda, Fuji Heavy, and Mazda, at 30.6% y/y, 25.7% y/y, and 25.1% y/y, respectively.

Outlook and Implications

Although the latest sales figures mark the 11th consecutive month of decline in Japan amid the weak global economy, the result represents an improvement over the performance of the past couple of months. Consumer and business confidence has been hit badly in Japan on the back of concerns over job security after the unemployment rate rose to a high of 5.2% in May from 5.0% in April. This was the highest level of unemployment since September 2003, although corporate bankruptcies rose at their slowest rate this year during the month; and the total number of bankruptcies fell 6.7% y/y during May. The Bank of Japan's (BoJ) quarterly Tankan survey showed that in the first quarter of this year business conditions for large manufacturing companies slumped; however, respondents now foresee some signs of improvement over the next two quarters. The diffusion index (DI) has meanwhile posted some of its lowest readings on record. The economy shrank at the revised rate of 3.8% quarter-on-quarter (q/q), or by 14.2% in annualised terms, during the first quarter of 2009, marking the biggest contraction since comparable records began in 1955. Exports also continued to witness a significant decline of 40.9% y/y during the month; however, the trade balance remained in surplus during the month as imports continued to experience significant reversals amid cooling domestic demand and tumbling commodity prices. Total imports fell by 42.4% on the year, resulting in a US$299.8-billion surplus on the trade balance.

This weak economic climate dragged the vehicle market down somewhat during June, although there were some bright spots: Honda continued to see a rise in its vehicle sales in June, its third consecutive month of growth. Part of the reason for this has been the automaker's new Insight, which has been introduced in the past five months and has witnessed impressive initial demand on the back of recently introduced government schemes to promote alternatively fuelled vehicles. Added to this has been the Fit, which despite having been on sale for around 18 months now is still pulling in more-than-adequate sales, bolstering the automaker's position. Toyota, which introduced its third-generation Prius hybrid in Japan last month, has received over 200,000 orders for its new Prius hybrid since its launch on 18 May (see Japan: 25 June 2005: Toyota Aiming for Profit in FY 2010/11, to Review Product Line-Up). These two hybrids have undoubtedly benefited from a new tax regime and scrappage scheme (see Japan: 19 June 2009: Japanese Government Starts Accepting Subsidy Applications for Eco-Cars, JAMA Expects Sales to Rise from June). Under the scheme, incentives totalling ¥370 billion (US$3.78 billion) are offered to customers who purchase "eco cars"—those that fulfil the country's 2010 fuel economy standards. The scheme consists of a trade-in payment of ¥250,000 for those with a standard car, or ¥125,000 for those with a "kei car" over 13 years old. A discount of ¥100,000 is also provided to those who decide to buy a standard car falling below these standards, or ¥50,000 for those buying "kei cars". This comes on top of already-agreed tax exemptions for "eco cars" introduced from 1 April 2009, with the government exempting such vehicles from "vehicle acquisition tax" and "tonnage tax" for the next three years. "New generation vehicles", such as hybrids, electric vehicles (EVs), clean-diesels, compressed natural gas (CNG)-powered vehicles, and fuel-cell models, are 100% exempt from these taxes. Gasoline (petrol)-fuelled passenger cars and commercial vehicles that meet certain standards also enjoy 50% and 75% tax breaks. Others also stand to benefit from this, including Fuji Heavy, which launched its Subaru plug-in Stella electric vehicle (EV) in Japan this month, and Mazda, which is reportedly considering broadening its model line-up in an effort to have more models eligible for the government's tax incentives (see Japan:18 June 2009: Mazda to Increase Model Line-Up to Qualify for "Green" Incentives—Report).

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