Japan Autos Report Q1 2010

Despite the positive effect of government subsidies on Japan's new vehicle sales, BMI has lowered its sales forecast for 2009 to a decline of 11% based on results for the first nine months of the year. Sales fell 15.5% y-o-y, with none of the vehicle segments achieving positive growth. Industry sales totalled 3,404,065, comprising passenger car sales of 2,893,938 units (-14%), truck sales of 500,076 units (- 23.15%), and bus sales of 10,051 (-19.44%). The worst performance came from the standard truck segment, which contracted almost 45%. These results do show a marginal improvement from H109, however, when total sales were down by over 20% y-o-y.

Two underlying trends in industry sales became apparent in September. Firstly, government incentives to encourage the purchase of fuel efficient vehicles are paying dividends, and secondly, sales of imported vehicles, even those produced by Japanese carmakers abroad, are on the slide. The Toyota Prius retained its position at the head of the market for the third straight month, while further proof of the impact of tax breaks on hybrid and small fuel efficient cars comes from Honda, which takes second place with its Fit compact and third place with its hybrid rival to the Prius, the Insight.

Japan stays in fourth in the Business Environment Ratings for the automotives industry in Asia Pacific, with an overall rating of 61.1 from a possible 100. The risks associated with a developed market still exist, however. Just as Australia and South Korea suffer disadvantages due to their developed statuses, a saturated market also weighs on Japan's ratings. While the country scores well in terms of its country risk, with low levels of corruption and a sound legal framework that have bumped up the market's overall score, the auto industry is nearing full capacity, and this consequently reduces production growth potential, while the high level of vehicle ownership restricts possible sales growth. Labour costs are also high, which adds to the cost of expanding production.

Despite, the relatively high ranking data for the first nine months of 2009 show every manufacturer posting a decline in sales compared with the same period of 2008 as the 12 domestic manufacturers registered combined sales of 3.404mn units, down 15.49% y-o-y. This was a marginal improvement on H109, when sales were down by over 20% y-o-y, as August registered the first positive sales growth for 13 months (2.3%). However, by September sales were down again by 3% y-o-y. All but three of the domestic brands recorded a double-digit decline in sales, with Nissan Diesel registering the weakest performance as its sales fell 49.95%, although this again was an improvement from its H109 drop of over 56% y-o-y. Small car specialist Daihatsu Motor was the strongest brand, relatively speaking, as its sales fell just 8.06% y-o-y.