Japanese vehicle production declines 7.5% y/y in April, exports up 1.1%

The Japan Automobile Manufacturers' Association (JAMA) has released its vehicle production and export data for April. According to the data, Japanese automakers produced a total of 713,155 vehicles at their domestic plants during the month, down 7.5% year on year (y/y). By vehicle type, passenger car output decreased 9.2% y/y during the month to 592,244 units, erasing a 1.1% increase in truck production to 108,825 units. Production of buses also grew, by 15.9% y/y to 12,086 units. Within the passenger car category, output of vehicles with an engine displacement in excess of 2.0 litres decreased 1.4% y/y to 359,572 units, while production of small vehicles contracted 19.8% y/y to 109,299 units. Meanwhile, production of minivehicles declined 18.5% y/y to 123,373 units.

Vehicle exports from Japan during April stood at 379,907 units, representing growth of 1.1% y/y. By destination, shipments grew 4.9% y/y to 151,532 units to North America – the biggest destination for Japanese-made vehicles – while deliveries to Europe fell 8.1% y/y. Shipments to the Middle East grew 9.4% y/y but they were down 19.8% y/y to Asia. Deliveries to Latin America, Africa, and Oceania grew 25.3% y/y, increased 6.3% y/y, and fell 1.2% y/y, respectively.

Toyota (excluding Daihatsu and Hino) continued to lead the way in terms of domestic output during April, despite its domestic production declining 3% y/y to 247,247 units. Its exports were also down 9.3% y/y to 148,297 units, marking the first decline in two months. With its monthly production shrinking only 1.8% y/y to 84,635 units, Suzuki maintained its position as the second largest vehicle producer in April. Its exports declined 5.9% y/y to 10,808 units, the first fall in seven months. Suzuki was followed by Mazda, which recorded monthly output of 68,174 units, down 11.4% y/y, while its exports declined 3.4% y/y during the month as it produced more vehicles overseas. Nissan occupied fourth position with monthly production of 63,311 units, up 3% due to increased demand for the X-Trail in markets outside Japan. Accordingly, export volumes were up 33.6% y/y to 45,488 units. With a moderate 0.4% increase in output to 53,358 units, Subaru manufacturer Fuji Heavy came fifth. Its exports were also up, by 16.6% y/y to 48,499 units. Fuji's production and export volumes represented record highs for the month. Daihatsu was relegated to sixth position as its domestic output declined 13.1% y/y to 52,951 units. Daihatsu was followed closely by Honda, which posted a 34.1% y/y rise in output to 51,944 units. With a 15.8% y/y decline in output to 46,475 units, Mitsubishi fell to the bottom of the list in April.

Output and implications

Domestic output in Japan fell for the 10th straight month in April, largely stemming from weak demand in the domestic market. Although sales of mainstream vehicles jumped 5.1% y/y in April, total industry sales were pulled down by a massive 22.5% y/y decline in minivehicle sales (see Japan: 1 May 2015: Japanese vehicle sales rise 5.1% y/y in April on low base of comparison). The fall in minivehicle sales in April was mainly down to a 50% increase in the tax on minivehicle ownership during the month. Compared with combined mainstream and minivehicle sales of 319,482 units in April, production stood at 713,155 vehicles, indicating the huge role exports still play for Japanese automakers. Export volumes grew as demand for Japanese-built vehicles remained strong in North America. Nissan, Fuji Heavy, and Mitsubishi were among the automakers that registered healthy growth in overseas volumes during the month.

Nissan and Fuji Heavy were the only automakers to achieve higher production volumes last month. Fuji Heavy posted its highest ever production level for April as a result of strong sales performances by the Impreza and Subaru XV in North America, while in the domestic market strong sales of the Levorg and WRX models made up for a decrease in sales of the Impreza, Subaru XV, and Forester. Meanwhile, Nissan, which is working on a long-term strategy to reduce exports from Japan, temporarily boosted local output as demand for its X-Trail (sold as the Rogue in other markets) increased in markets outside Japan. Among the automakers posting the biggest output declines in April were Honda, Mitsubishi, and Daihatsu. Apart from weak domestic demand, Honda is also reeling from the massive recalls related to faulty airbags and quality issues. Meanwhile, Daihatsu – a player largely focused on the domestic market – suffered as a result of the recent increase in minivehicle ownership tax.

The combination of weak domestic demand and certain automakers' focus on overseas production is likely to result in the continuation of the trend of lower domestic production. IHS Automotive forecasts that light-vehicle production in Japan will reach 8.78 million units in 2015, down 4.9% y/y. We expect Fuji Heavy to maintain strong domestic output until next year when it is due to transfer output of the North American variant of the Impreza to the United States. Mazda is another automaker that is expected to do well in terms of domestic production, given its success in Japan with its diesel vehicles. On the other hand, Mitsubishi will face a challenging 2015 since minicar sales are losing momentum in Japan as a result of difficult market conditions, including the minivehicle tax increase, and new model launches from its competitors.