Japanese Vehicle Sales Register Significant Growth During November

The Japanese vehicle market grew again during November, according to data released by the Japan Automobile Dealers Association (JADA). During the month, the total number of vehicles sold in the country rose a significant 18.3% year-on-year (y/y) to 436,535 units, with the year-to-date (YTD) sales decline having reduced significantly to 11.3% y/y, to 4.237 million units. The number of vehicle sales in the traditional categories witnessed its fourth straight monthly rise in November by a massive 36.0% y/y to 293,410 units, split between 268,450 passenger cars (up 43.9% y/y), 24,075 trucks (down 15.0% y/y), and 885 buses (down 2.4% y/y).

As expected, almost all the country's main automakers witnessed growth in their sales volume during the month. Toyota, by far the largest-selling vehicle manufacturer in the country, saw a significant growth in its sales, by 38.7% y/y to 147,513 units, while Honda witnessed its highest percentage y/y rise in sales among the main automakers in Japan during the month, by 72.9% y/y to 50,908 units, cementing its position ahead of Nissan. Third-placed Nissan witnessed a significant 32.8% y/y growth in its sales during November, to 40,033 units. Mazda and Fuji Heavy witnessed 21.2% y/y, and 18.2% y/y growth in sales, although unit sales at both automakers remained at low levels of 11,758 units and 5,875 units. Mitsubishi posted the third-straight significant rise during the month, by 21.8% y/y to 4,631 units. Suzuki was the exception to these gains, and was the only main Japanese automaker to register second straight decline during November, as its vehicle sales again fell by 22.3% y/y to 4,473 units.

The minivehicle segment continued to struggle during November, according to data released by the Japan Mini Vehicle Association. During the month, sales in this category further fell by 6.5% y/y to 143,125 units, taking the YTD sales now down by 10.4% y/y to 1.566 million units. Of the total sales during the month, 100,271 were passenger vehicles, a decline of 8.2% y/y, while commercial vehicle sales stood at 42,854 units, down 2.4% y/y. On a brand basis, nearly all the main automakers recorded declines of varying degrees in the month, although rates of decline have improved significantly. Daihatsu retained its position as the largest-selling minivehicle manufacturer in Japan during November, having posted a decline of 1.5% y/y to 50,462 units. Suzuki remained at the second-position during the month, posting a decline of 3.4% y/y, to 47,107 units. Similarly, Nissan and Mitsubishi’s vehicle sales in this segment fell by the same 6.8% y/y during the month to, 10,678 units and 8,614 units, respectively. Mazda remained the only automaker in the minivehicle category to witness growth, as its vehicle sales rising by 4.7% y/y during November, although it managed to sell only 3,995 units. The largest percentage decline during the month was reported by Honda of 30.1% y/y.

Outlook and Implications

The latest figures show a third consecutive rise in overall vehicle sales during November, led by passenger vehicles, as the government's market support measures finally produce dividends. The latest results have also been helped by the low base of comparison provided by the data for the final months of 2008; this will become more apparent in December. This has also been helped by signs of recovery in consumer and business sentiment in Japan over the past couple of months as the unemployment rate has started to ease and the business environment has been more conducive. The Japanese economy grew for the second consecutive quarter during the third quarter at 4.8% annual rate. In addition, the unemployment rate improved for a second straight month in September to a four-month low of 5.3%, down from 5.5% in August, although this figure does not take into account those who are now ineligible for unemployment benefit. The rate of corporate bankruptcies has been declining over the past several months on the back of the government's stimulus measures. According to the Bank of Japan's (BoJ) Tanken survey, corporate confidence improved for a second straight quarter in the third quarter as the sentiment index for major manufacturers improved to -33 in September from -48 in June, after hitting a record low of -58 in March. The respondents also saw some signs of improvement during the next quarter. The Diffusion Index (DI) has meanwhile posted some of its lowest readings on record. The trade balance has been in surplus over the past couple of months and exports have started rising, although the recent strengthening of the Japanese yen against other major currencies has had a major impact on exports and imports. However, although BoJ governor Masaaki Shirakawa believes exports are expected to continue to increase as overseas economies start recovering, margins are expected to be hit badly should the Japanese yen continue to strengthen (see Japan: 20 November 2009: Nissan COO Reiterates Concerns over Strengthening of Japanese Yen, Cancellation of Market Subsidies).

The Japanese automotive market has clearly been benefiting from the industry support measures and the government is continuing to accept applications from customers who have scrapped their cars and replaced them with vehicles that are eligible for incentives under the country's "eco-car" regulations. 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. As a result, this scheme has been extremely beneficial for fuel-efficient models. Toyota and Honda have been among the major beneficiaries as the two automakers are witnessing stronger-than-expected demand for the Prius and Insight hybrid, respectively, while they are also seeing strength from recent launches (see Japan: 23 November 2009: Toyota Receives More Orders than Anticipated for Revamped Mark X in Japan and Japan: 10 November 2009: Honda Receives More Orders than Expected for Latest-Generation Step WGN in Japan). In addition, Toyota is also receiving more orders than expected for the first hybrid-only model from its premium Lexus brand, the HS250h. The market may see a further rise in the months to come as a result of new model launches by major automakers, including a new full-hybrid premium-segment sedan, the SAI, by Toyota, for which it has already received almost 14,000 pre-orders. The market could be up during the next couple of months as a result of some pull-forward of demand as many of the ongoing incentives are nearing their expiration date at end of the first quarter of 2010. However, the Japanese government was considering extending the ongoing eco-car scrappage incentive programme by a further six months (see Japan: 23 November 2009: Japanese Government Mulling Extension of Scrappage Scheme) in an attempt to maintain momentum.

However, although reports suggest that the government is anticipating that this scheme could benefit 1 million vehicles sold in the country, particularly as automakers have already started developing more and more models to take advantage of the incentives, it is unclear whether this will translate into a significant number of additional sales given the current uncertainties in the domestic as well as global economy. However, IHS Global Insight now believes that vehicle sales declines will be 11.5% y/y at around 4.5 million units, with a 9.3% y/y decline in passenger cars to 3.84 million units and a 22.7% y/y decline in commercial vehicles to around 660,000 units.