Association, Inc.

Issue No. 2, 2012


by Peter Nunn

The roads in Japan are changing colour; they are definitely becoming greener.

Sales of eco-friendly cars have been forging ahead for quite some time now in Japan, with hybrid models such as the Toyota Prius and Honda Fit, and the Nissan Leaf and Mitsubishi i-MiEV electric vehicles, leading the way.

In 2009 the Japanese government introduced tax reductions/exemptions and subsidies to help move up the purchase of not only alternative-fuel vehicles, but also fuel-efficient, low-emission conventional vehicles including heavy-duty trucks and buses (the latter two not considered here). In response, domestic automakers and major importers, including Volkswagen and BMW, have been introducing an ever-broadening range of eco-friendly cars to the Japanese market.

Now a fresh round of incentives is in force to spur the market again. Japan’s 2015 fuel efficiency standards are central to the scheme. The 2015 standard for passenger cars is 16.8km/L (representing an average for all vehicle weight categories, with fuel consumption JC08 test cycle-measured). In Europe this would equate to 5.4L/100km.

At the top of the incentives tree, electric (including fuel cell), plug-in hybrid, clean diesel and natural gas vehicles are completely exempt from the acquisition tax (paid once, upon vehicle purchase) and the tonnage tax (with the exemption applied at the time of first mandatory vehicle inspection, and a 50% reduction on the tax applied at the second inspection). Exactly the same benefits are granted to petrol cars, including hybrids, performing 20% better than the 2015 fuel efficiency standard and whose tailpipe emissions are 75% down from 2005 standards. For petrol cars (with the aforementioned emissions performance) that surpass the 2015 standard by 10%, a 75% reduction applies on both taxes, and for those that meet the standard, both taxes are reduced by 50%.

To translate this into some specific examples, Toyota’s 1.5-litre compact Aqua hybrid (33.0-35.4km/L), Mazda’s CX-5 clean diesel (18.6km/L), Nissan’s X-Trail clean diesel (13.8km/L) and BMW’s X-5 clean diesel (11.0km/L) all qualify for the exemptions, while Suzuki’s petrol-powered Swift XG featuring idling-prevention (“stop-start”) technology (21.8km/L) and Volkswagen’s 1.2-litre Golf petrol hatchback with its TSI Trendline Bluemotion Technology (19.0km/L) qualify for the 75% reductions.

This scheme is in effect from 1 April 2012 through 31 March 2015 for the acquisition tax, and from 1 May 2012 through 30 April 2015 for the tonnage tax.

What about the purchasing subsidies? For cars that meet the fuel efficiency requirements (ie, compliant with the 2015 standard or 25% better than the 2010 standard), a new round is in effect as of April 2 this year, covering registrations from 20 December 2011 (in other words, retroactive subsidy applications are OK) through 31 January 2013. Subsidy amounts vary, but for most passenger cars the subsidy has been fixed at 100,000 (933, at press time) per vehicle.

Eco-car tax reductions/exemptions have been in place since 1 April 2009 (in tandem with purchasing subsidies, whose first round terminated in September 2010) and are at least partially responsible for the strong performance of Japan’s market of late and its growing green car boom.