Japanese Vehicle Sales Decline 33.4% in May on Continuing Impact of Natural Disaster

Japanese vehicle sales continued their sharp decline in May primarily due to the continuing impact of the devastating earthquake and tsunami that hit Japan on 11 March. According to vehicle sales data released by the Japan Automobile Dealers Association (JADA), the total number of vehicles sold in the country fell by a significant 33.4% year-on-year (y/y) to 237,364 units compared with 356,147 units in May 2010. Vehicle sales in the traditional categories fell for the ninth consecutive month during May by 37.8% y/y to 142,154 units over 228,514 units a year ago. Of the monthly total, while passenger car sales fell by 38% y/y to 128,544 units, trucks sales declined by 35.4% to 13,325 units and bus sales slipped 53.2% to 285 units. Imported vehicle sales continued their growth momentum recording an increase of 31% y/y to 19,238 units. Meanwhile, year-to-date (YTD) vehicle sales recorded a 29% y/y decline to 1.57 million units compared with 2.21 million units during the first five months of 2010. Sales in traditional categories declined 32% y/y to 970,155 units, minivehicle witnessed a 23.5% y/y decline in unit sales to 597,265 units.

All major Japanese automakers except Suzuki and Fuji Heavy, the maker of Subaru-brand vehicles, witnessed a sharp decline in vehicle sales during May compared with the same month in 2010. Although Toyota continued to maintain its traditional position as the largest automaker in Japan, the company recorded a strong 56.6% y/y fall in sales to 48,733 units. Nissan, at number two, reported a 16.1% decline in vehicle sales to 28,037 units. Honda sold 21,294 units during the month, down 34.4% compared with a year ago. Among the smaller automakers, Mazda's sales declined by 37.1% during the month to 8,510 units, while Mitsubishi recorded a moderate fall in sales of 4.9% to 4,059 units. Toyota's luxury car division, Lexus witnessed a 5.3% decline in sales to 1,789 units. However, Suzuki reported a 27.3% y/y increase in sales to 5,434 units while Fuji Heavy reported a 17.7% growth in sales to 5,622 units. Among commercial vehicle manufacturers, Isuzu reported a 46.2% decline in sales to 1,678 units while its nearest rival in the segment Hino witnessed a 42.6% sales decline to 1,078 units. Among the smaller commercial vehicle maker, Mitsubishi Fuso sales declined by 43.2%, while UD Trucks reported the sharpest decline of 58% compared with a year ago.

The minivehicle segment, which comprises car with engine capacity of 660 cc or less, also witnessed a sharp y/y decline in sales during May. According to data released by the Japan Mini Vehicle Association, sales in the category fell for the eighth consecutive month by 25.4% y/y to 95,210 units compared with 127,633 units during May 2010. Passenger-vehicle sales in this category fell by 23.1% y/y to 71,917 units, while commercial vehicle sales declined by 31.8% y/y to 23,293 units. Although Toyota's small car division Daihatsu managed to retain its leading position in the minivehicle segment, it witnessed a 25.7% decline in sales to 32,372 units. Daihatsu's nearest rival Suzuki, at number two witnessed a sharper decline in sales of 28.5% y/y to 31,039 units. Nissan witnessed a 2.6% fall in sales to 9,950 units, and Honda recorded a sharper decline in sales of 35.3% to 7,616 units. Among other automakers, Mitsubishi witnessed its sales slipped by 9.7% to 6,493 units while Fuji Heavy recorded the sharpest decline in the minivehicle segment of 45.3% y/y to 4,093 units. Mazda reported an 8.9% fall in sales to 3,645 units.

Outlook and Implications

May's data mark the ninth straight decline in vehicle sales in Japan since September 2010 following the withdrawal of the "eco-car" sales incentive programme by the Japanese government. It also marks the third month of steep decline in domestic vehicle sales after the 11 March disaster which massively disrupted vehicle production in Japan. Domestic automakers witnessed a relatively moderate degree of decline in sales during May compared with the record fall of 47.3% in preceding month as they were able to operate their domestic plants for the whole month for the first time since the disaster hit the country (see Japan: 3 May 2011: Japanese Vehicle Sales Decline 47.3% in April on Back of Natural Disaster). The recovery in production improved the supply of vehicles to dealers in Japan which contributed to lifting sales during the Month. An unidentified official from JADA said, "Many people had been waiting for vehicles to arrive... and new automobiles started reaching consumers". He further added that sales are expected to recover further in accordance with a production recovery.

Meanwhile, the Japanese economy fell during the first quarter of this year. According to government data, GDP fell by 0.9% y/y during the quarter. With this, the Japanese economy recorded a second straight decline in GDP, for the first time since the global financial crisis of 2008/09. The decline in GDP was led by a fall in private consumption as consumer spending fell 0.6% compared with the same period a year ago. However, Bank of Japan (BoJ) is expecting a quicker recovery in the growth of the economy as the supply chain situation improves. The BoJ expects the domestic economy to return to moderate growth during the second half of the current fiscal year (FY) 2011/12. Masaaki Shirakawa, governor of the BoJ said, "As supply-side constraints ease and production regains traction, the economy is expected to return to the moderate recovery path from the second half of fiscal 2011, backed by an increase in exports reflecting the high growth of the global economy and by a rise in demand for restoring capital stock".