Association, Inc.

Issue No. 4, 2009

Update on Japan's vehicle scrapping and purchasing incentives

It's no secret that over the past year, car makers around the world have been scrambling to adapt to a slump in demand, ever since the global economic downturn took hold.  A wealth of new product as well as strong incentives from governments have, however, helped stabilise markets and as of autumn 2009, there are tentative signs that a corner has at last been turned.

Here in Japan, the government has been strongly pro-active in trying to boost demand through a series of welcome, if complex, incentive programmes.  These incentives, besides rebuilding car sales, are also aimed at getting more 'clean' cars on the road, and what might euphemistically be called 'clunkers' off of it.

If, for instance, you're trading in your 13 year-old (or older) car and buying a new one that meets Japan’s 2010 fuel efficiency standards, you will receive a subsidy of ¥250,000 (roughly €1,850)—or ¥125,000 if your new car is a mini.

If you're not replacing an old car but buying a new-generation model whose fuel efficiency is at least 15% better than the 2010 standards, then you’ll still receive a subsidy of ¥100,000, or about €740 (¥50,000 for a mini).

When it comes to taxes on vehicle ownership, the burden on users in Japan is very heavy, and JAMA has long called for an overhaul to create a fairer system.  Under these 'green' purchasing incentives, buyers of new, eco-friendly cars get several of the tax breaks that JAMA has wanted to see: the vehicle acquisition tax and tonnage (weight) tax are slashed by 50 or 75% (with hybrids and EVs being entirely exempt from both taxes), and the automobile tax reduced by 25 or 50%—all these tax cuts being applicable on a one-time basis only.

Cars that have benefited under these incentives to date include Toyota's Prius and Vitz (Yaris), Honda's Insight, Mazda's Demio (Mazda2) and Nissan's Note and Serena.

The incentive measures also apply to mini-vehicles (660cc), as indicated, and to heavy-duty vehicles (over 3.5 tons) which, in both instances, is a situation unique to Japan—the mini-vehicle market itself being unique to Japan, of course.  Thanks to those measures, and with manufacturers and dealers busy promoting their eco-friendly vehicles through TV ads, Web sites, and so on, car sales overall have managed to stabilise, and some individual HDV models have done well.

Still, the question remains: What will happen when these incentive programmes end, between 2010 and 2012?  Will demand in Japan's car market be back on its feet by then and the automobile business and its supporting industries revitalised?

Let's hope so.

(Note: In addition to the passenger cars, the photos feature Daihatsu’s Mira Cocoa mini-vehicle and Mitsubishi Fuso's Super Great truck.)