Japanese Automakers' Domestic Output Up 19.2% Y/Y in February
February continued to see a strong recovery in domestic output by Japanese automakers as the extra working day due to 2012 being a leap year, combined with demand driven by the government's reintroduction of eco-car incentives and a low base of comparison.
IHS Global Insight Perspective
Japanese automakers' domestic production continued its upward trend in February, with all automakers recording year-on-year output growths except Mitsubishi. Exports during the month also grew marginally on the back of the yen's recent weakening.
All the Japanese automakers except Mitsubishi saw domestic output grow last month as demand surged on the back of new government eco-car purchasing incentives, helping to relieve pressure on an industry recovering from last year's natural disasters and the strong yen.
Japanese automakers are poised to raise output volume further in the coming months as government subsidies on the purchase of fuel-efficient vehicles are expected to continue to buoy demand. However, they need to be wary of the possibility of the programme's effect wearing off earlier than expected as the current brisk demand may use up the allocated budget ahead of schedule.
Japan's eight main vehicle manufacturers today released their production and export data for February. According to the data, published by Reuters, all the automakers saw a continuation of the recovery in domestic vehicle production except Mitsubishi. Toyota (excluding Daihatsu and Hino) remained clearly the largest vehicle manufacturer in Japan during the month, having produced 346,215 units at its Japanese plants during the month, up 22.1% year-on-year (y/y). Its exports during the month increased by 13.4% y/y, while overseas production jumped 32.3% y/y, leading to a robust 27.8% y/y expansion in its global output. Honda managed to sneak past Nissan during the month, with domestic output of 115,920 units, registering the highest y/y growth of 64.8% among its peers. Honda's exports from Japan continued to rise y/y as they did during January, growing 14.8%. Nissan followed closely with monthly domestic production of 111,786 units, up 19.6% y/y. Its exports grew 20.0% y/y during February to 65,031 vehicles and were second only to Toyota in terms of volume, mainly on the back of strong demand for its Rogue crossover sport utility vehicle (SUV) in North America.
Suzuki reported a small 3.4% y/y rise in domestic output to 86,584 vehicles, its seventh straight monthly gain. Mazda, as in January, managed to sustain its domestic output to a little over 70,000 vehicles, a marginal 0.2% y/y drop. Mitsubishi, however, continued to witness declines in its domestic output to 52,205 vehicles, going down 15.2% y/y, its eighth consecutive monthly loss. Toyota's small-car unit Daihatsu recorded its fifth consecutive monthly increase in domestic output to 74,189 units, expanding more than 30% y/y. However, its exports dropped 24.3% y/y to a mere 1,438 units. Fuji Heavy, manufacturer of Subaru-brand vehicles, witnessed a strong 21.5% y/y rise in domestic production to a little under 50,000 units, while its overseas production set an all-time February record, jumping almost 19% y/y.
Japanese Carmakers' Production: February 2012
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Outlook and Implications
Japanese automakers continued to ramp up output in February to meet domestic demand as Japanese consumers stepped up their purchases of new cars as soon as the government announced its new subsidy programme on the purchase of fuel-efficient vehicles last December in a bid to stimulate auto demand in the country. The production trend during February was helped by the extra working day due to 2012 being a leap year and was very similar to that in January when all major Japanese automakers recorded y/y output growth except Mitsubishi (see Japan: 24 February 2012: Japanese Automakers' Domestic Output Up 18.8% Y/Y in January). Japan's top three automakers—Toyota, Nissan and Honda—are poised to raise output volume further in the coming months as government subsidies for fuel-efficient vehicles worth JPY300 billion (USD3.8 billion) are expected to continue to keep the consumers interested in new vehicle purchases. Toyota witnessed its seventh consecutive month of y/y domestic production increase and an all-time monthly record in its overseas output due to increased production in almost all regions. Honda’s domestic production during February experienced a y/y increase for the third consecutive month as its sales (including minivehicles) during the month also grew 58.3% y/y, mainly due to brisk sales of the Fit and the N Box minicar, which was the industry's third best-selling car in the minivehicle category during February. Honda’s overseas production experienced a y/y increase for the first time in the past five months, as it achieved all-time monthly production records in North America, including the United States, and record production in China for the month of February. Similarly, Nissan expanded domestic production during February, mainly due to increased demand for its mini-MPV Note, which qualifies for the government’s eco-car subsidy programme, and increased exports of Rogue and Juke. The combined domestic output of the top three Japanese automakers jumped 28.3% y/y during the month.
Meanwhile, Mitsubishi was largely the only Japanese automaker struggling to keep pace with the heightened auto demand at home. The automaker’s domestic output decline during February was its seventh consecutive monthly decrease since July 2011. Consequently, Mitsubishi’s exports from Japan in February were down 25% y/y, marking the sixth consecutive monthly y/y decrease since August 2011. However, its overseas February production marked the first y/y increase in two months since December 2011, mainly on the back of an output surge in Asia owing to increased output at its Thai plant as the company worked to regain production lost due to last year's flooding and also robust y/y output gains in Taiwan and China where there were fewer operating days last year due to the Chinese New Year holiday. Still, Mitsubishi’s total global February production contracted 3.3% y/y for its seventh consecutive monthly decrease since July 2011 as it pursues restructuring initiatives like discontinuation of region-specific models in its biggest markets of the US and Europe, in line with its longer term goal to halve the number of platforms to six by March 2016 from 12 at the end of March 2011.
The Japan Automobile Manufacturers Association (JAMA) expects Japan's auto demand to increase 19.1% y/y to 5.02 million vehicles in 2012 due to the government's incentive scheme. Meanwhile, the Japan Automobile Dealers Association (JADA), said sales of non-minivehicles surged 31.9% y/y while those of 660-cc minivehicles rose 25.4% y/y in February on the back of the incentive programme (see Japan: 1 March 2012: Japanese Vehicle Sales Jump 31.9% Y/Y in February). The impact of the tax incentives on the auto industry is already visible as Toyota has raised its domestic sales projection for the current year by 100,000 units (see Japan: 25 January 2012: Toyota Ups 2012 Domestic Sales Projection by 100,000 Units, Negotiates Lower Steel Prices with Nippon). The government will start accepting applications for subsidies of up to JPY100,000 per vehicle starting April this year, but those who bought fuel-efficient cars on or after 20 December last year are eligible to apply retroactively. Although the industry expects the subsidies to continue to buoy demand for fuel-efficient vehicles, Japanese automakers are also bracing for the programme's effect to wear off much earlier than they hope as the current brisk demand may use up the allocated budget ahead of schedule, a trend seen in 2010.
IHS Automotive expects Japanese light-vehicle production to jump to 9,271,582 units in 2012 on a low base of comparison and as tax incentives boost domestic demand. Japanese vehicle exports, which until recently were subdued due to the persistently high yen against other major global currencies, saw a slight improvement in February when they grew 4.4% y/y. This welcome change has been brought about by the recent increases in imports and overseas direct investment by Japanese firms and the Bank of Japan's surprise easing in mid-February, which has caused a shift in the balance of flows in the dollar versus the yen, and has helped set the stage for the yen's weakness in the past few weeks. This, coupled with a lower basis of comparison in the year earlier, when the earthquake and tsunami led to supply-chain bottlenecks and a steep drop in production, should also help to raise vehicle output numbers over the next few months.
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