Japanese Auto Sales Climb a Record 92% Y/Y in April

New vehicle sales in Japan, excluding minivehicles, totalled 208,977 units during April, up an all-time monthly record of 92% year-on-year (y/y) from 108,824 in the same month a year earlier, according to data released by the Japan Automobile Dealers Association (JADA) today (1 May). Of the total, sales of passenger cars jumped 92.6% y/y to 187,036 vehicles, while sales of trucks jumped 85.7% y/y to 20,939 units and those of buses more than doubled to 1,002 units. Meanwhile, sales of minivehicles, with engine displacements of up to 660cc, expanded a similar 96% y/y to 150,654 units during the month, according to the Japan Mini Vehicles Association. This meant that Japan's industry-wide auto sales, including minivehicles, almost doubled with a 93.7% y/y surge to 359,631 vehicles in April.

All major automakers reflected substantial y/y sales gains during April, except Mitsubishi. Market-leader Toyota's sales nearly tripled y/y to 102,550 units in the month, while its upscale luxury car unit Lexus more than doubled y/y to 3,456 units. Honda and Nissan continued to compete for second position, with the former seeing its sales jump 61.5% y/y to 30,561 units to take the second spot and the latter settling for third position with sales of 26,396 units, up 51.6% y/y. Mazda managed to take fourth position with sales volumes of 10,306 units during the month, a significant 56.2% y/y rise. Suzuki followed Mazda with sales of 7,635 vehicles, up a strong 78.1% y/y gain. Fuji Heavy, the producer of Subaru-brand vehicles, lagged behind Suzuki with sales of 5,237 units, up 37.6% y/y. Mitsubishi emerged as the only major Japanese automaker to witness a sales decline, going down 35% y/y to 2,285 units. A total of 15,203 vehicles were imported into Japan during April, down a modest 8.6% y/y. All other automakers put together combined sales of 5,348 units during the month, compared to a mere 441 units in April 2011.

Outlook and Implications

April was the eighth straight month of non-minivehicle sales growth and the seventh straight month of growth in minicar sales, with the latter constituting an increasingly significant 42% share of total industry sales in Japan during the month. The record sales surge during April, sustaining a strong upward trend as government subsidies helped accelerate the recovery in demand from the lows seen after last year's natural disasters, even bettered the growth witnessed in March (see Japan: 2 April 2012: Japanese Auto Sales Surge 78.2% Y/Y in March). This phenomenal sales momentum was exacerbated by the lower basis of comparison in the year-earlier period when sales plummeted on the continuing impact of the 11 March earthquake and subsequent tsunami (see Japan: 3 May 2011: Japanese Vehicle Sales Decline 47.3% in April on Back of Natural Disaster). While sales last month managed to bounce back from the disaster-induced plunge a year earlier, they still failed to reach the pre-quake level of 222,095 posted in April 2010. The subsidy-induced sales momentum was first seen in January when industry-wide sales expanded 40.7% y/y, and the trend has carried over since. Factoring in the latest monthly figures, Japan's domestic auto sales for the first four months of 2012 have jumped a robust 57.4% y/y to 1,303,416 units, while those of minivehicles have surged 48.1% y/y to 743,660 units.

The upbeat domestic sales figures for the first month of the new business year will fan optimism that Japanese automakers will continue to regain sales momentum after last year's disruptions caused by the natural disasters in Japan and Thailand. To help Japanese automakers struggling with the yen's strength, the government is offering a total of JPY300 billion (USD3.8 billion) in subsidies to those who buy fuel-efficient cars between December 20 last year and the end of January next year. Customers will receive subsidies worth JPY70,000-100,000 per vehicle until the allocated budget runs out. As executives at major automakers expect the current strong appetite for the subsidies to use up the budget by around the summer, car companies are bracing for a sales drop when the programme comes to an end, likely prematurely.

"It's inevitable we'll see adverse effects," Honda executive vice-president Tetsuo Iwamura said at a press conference for the company's latest earnings announced last Friday (27 April). The automaker hopes to counter the likely reversal in demand with the recently launched and partially redesigned StepWGN minivan, along with persistent sales of the Freed compact minivan. Honda has said it plans to boost domestic sales by 21% y/y to 710,000 vehicles in the current fiscal year to March 2013. Meanwhile, Toyota and Nissan are expected to outline plans to boost sales in the home market when they report their latest earnings next week. Buoyed by the incentives, which particularly benefit it given its newly launched portfolio of fuel-efficient hybrid and small models, Japan's largest automaker Toyota has already raised its domestic sales forecast for 2012 by 100,000 vehicles to 1.63 million (see Japan: 23 January 2012: Toyota Lifts Japanese Sales Outlook for 2012 on Eco-Car Subsidy Revival). The revised projection, which includes its Lexus luxury brand, translates to a 37% increase from the 2011 sales projections. The automaker has also been ramping up output of its Aqua hybrid on the back of overwhelming demand ever since the vehicle was released immediately following the reinstatement of the eco-car subsidy programme. April also witnessed a reversal of the trend in vehicle imports into Japan, with imports falling almost 9% y/y compared to a strong 22% y/y gain in February and a robust 41% y/y surge in March. This welcome change is likely brought about by the yen's depreciation from an all-time high of JPY75.31:USD1.00 last October to around JPY81:USD1.00 in recent weeks, offering Japan's export-dependent automakers some relief from margin pressures.

Industry estimates project Japanese vehicle demand, including minivehicles, to rise 19% y/y to 5.02 million vehicles in 2012, partly due to higher sales in tsunami-hit areas where thousands of cars were destroyed, and thanks to government efforts to stimulate demand. IHS Automotive projections are slightly more conservative considering that in recent years the Japanese population has shown a declining trend, coupled with rising urbanisation, leading to a higher reliance on public transport. IHS Automotive pegs Japanese light-vehicle sales to expand to 4.79 million units in calendar year 2012, with passenger car sales expected to grow by just over 16% to around 4.16 million units and commercial vehicle sales to increase by more than 21% to 627,000 units, excluding heavy commercial vehicles.