February 8, 2007

Forecast for Japan's Vehicle Demand in Calendar Year 2007

Motor Vehicles

  1. Total Demand for Passenger Cars & Commercial Vehicles
    1. Total demand for passenger cars and commercial vehicles in calendar 2006 is estimated at 5.74 million units, a decline of 1.9% from the previous year. By category, new registrations for standard and small-sized vehicles are expected to reach 3.72 million units, down 5.2% from 2005, while mini-vehicle sales are projected at 2.01 million units, up 4.8%.

      Truck demand is also expected to surge owing to such factors as an increase in new vehicle replacement purchases in continuing response to the compliance mandated by Japan’s Motor Vehicle NOx & PM Emissions Act.  In contrast, in the standard and small-sized passenger car categories in which fewer new models and model changes were introduced in 2006 compared to the year before, demand is expected to finish far below the 2005 level.  As a result, overall demand for 2006 is projected to be slightly lower than in the previous year.

    2. For 2007 the following projections are taken into account:
      • Although the U.S. economy is expected to experience a slowdown, robust economic conditions in China support forecasts for continued growth in exports;
      • Anticipated strong corporate performance should promote increased capital investment, with other factors also buoying hopes for a sustained economic recovery in Japan;
      • Negative trends include a significant decline in vehicles purchased to comply with the Motor Vehicle NOx & PM Emissions Act.

      In view of the foregoing, total demand for passenger cars and commercial  vehicles in 2007 is projected at 5.63 million units, down 2.0% from 2006,  breaking down into 3.63 million standard and small-sized vehicles (down 2.4% from 2006) and 1.99 million mini-vehicles (down 1.1%).

  2. Standard and Small-Sized Passenger Cars
    1. Sales of standard and small-sized passenger cars in 2006 should total 3.14 million units, a decline of 6.4% from 2005.  The main factors behind this forecast are as follows:
      • While the recovery in production and gains in corporate earnings have had a positive impact on employment, no significant recovery in personal income or in consumer confidence has been recorded;
      • Surging fuel prices sparked a shift in demand to minicars, with a focus on smaller models.
    2. For 2007 the demand forecast for this category is 3.15 million units, up 0.2% over 2006, taking into account the following:
      • Calendar 2007 should see rises in personal income fuelled by a continued recovery in corporate earnings, with a projected boost in consumption in the second half of the year;
      • More stable fuel prices are expected to cause the shift to minicars to level off.
  3. Mini Passenger Cars
    1. Minicar sales in 2006 are estimated at 1.5 million units, a year-on-year increase of 8.1%.  Key factors include:
      • The heightened demand shift to minicars, spurred by the sharp rise in fuel prices;
      • Sustained effects of the previous year’s introduction of new and remodelled vehicles.
    2. For 2007, although buyers will continue to lean towards minicars, the following factors are also foreseen:
      • Stabilized fuel prices; and
      • Fewer new model launches.
  4. Standard Trucks
    1. Standard truck demand in 2006 has been impacted by:
      • Increased new vehicle replacement demand to comply with the Motor Vehicle NOx & PM Emissions Act;
      • The recovery in corporate earnings and business confidence, even though public works spending continued to decline.

      Sales of these vehicles are thus expected to reach 209,000 units, a gain of 5.8% over 2005.  Of that total, demand for heavy-duty and medium-sized trucks should account for 110,000 units, up 3.2% from 2005.

    2. In 2007 sales are projected at 160,000 units, a steep decline of 23.4% from 2006 linked to lower demand targeting compliance with the Motor Vehicle NOx & PM Emissions Act.  Demand for heavy-duty and medium-sized trucks should account for 80,000 units of that total, down 27.3% from 2006.
  5. Small Trucks
    1. Small truck sales in 2006 are estimated at 354,000 units, up 0.7% from the previous year.  New vehicle replacement demand linked to the Motor Vehicle NOx & PM Emissions Act weakened in the fourth quarter, with a general leveling-off in annual sales compared to 2005 therefore anticipated.
    2. In 2007 a major downturn in demand in response to the Motor Vehicle NOx & PM Emissions Act is expected to hamper small truck sales, which should finish at 310,000 units, a decline of 12.4% from 2006.
  6. Mini-Trucks
    1. Mini-truck demand in 2006 should total 517,000 units, down 3.7% from 2005.  Contributing factors include structural changes such as decreases in the ranks of small-business operators, farming households and other principal users, along with the dwindling impact of model changes introduced in the previous year.
    2. In 2007 the economic recovery will not be sufficient to fully overcome the aforementioned structural transitions, thus prompting forecasts of 512,000 unit sales (down 1% from 2006).
  7. Large Buses
    1. Large bus demand in 2006 should reach 6,100 units, up 4.2% from the previous year.  This growth is attributable to continued replacement demand in response to the Motor Vehicle NOx & PM Emissions Act.
    2. In 2007 the forecast is for a substantial decline in units purchased to comply with regulations under the Motor Vehicle NOx & PM Emissions Act, with total sales projected to lag at 4,800 units (down 21.3% from 2006).
  8. Small Buses
    1. Demand for small buses in 2006 is expected to total 11,500 units, a decline of 3.3% from 2005.  Replacement purchases to comply with the Motor Vehicle NOx & PM Emissions Act accounted for part of this demand.  Nevertheless, soaring fuel prices should be a factor in pushing sales below the previous year’s level.
    2. In 2007 small buses will mirror the performance of trucks by experiencing a significant dip in sales of replacement vehicles in response to NOx and PM emissions regulations.  Demand is thus forecast at 10,200 units, a decline of 11.3% from 2006.

Motorcycles

  1. Total Demand for Motorcycles

    In recent years the motorcycle environment in Japan has benefited from a number of initiatives, including the lifting of the ban on tandem riding on expressways, the establishment of a new automatic-transmission motorcycle driver’s license category, and the launch of an electronic toll collection system (ETC) for motorcycle users.  Negative factors include the youth population’s demographic decline and the corresponding slowdown in licenses issued in the Class-1 motor-driven cycle category (50cc and under).  There is a clear need to address not only the shortage of dedicated motorcycle parking bays, but also motorcycle emissions regulations and other pressing issues.  Against this backdrop, current and upcoming demand is estimated as follows.

    1. Total domestic sales of motorcycles in calendar 2006 should finish at 736,000 units, down 0.3% from the previous year.  Compared to 2005, contributing factors include—despite the leveling-off in Class-1 motor-driven cycles and a gain for small-sized motorcycles—declines for both Class-2 motor-driven cycles and mini-sized motorcycles.
    2. In 2007 mini-sized motorcycles should post a year-on-year gain, while Class-2 motor-driven cycles and small-sized motorcycles should finish on a par with 2006.  However, sales of Class-1 motor-driven cycles are expected to drop, with total demand therefore projected to dip to 721,000 units, a 2.0% decline from the previous year.
  2. Class-1 Motor-Driven Cycles (50cc & under)
    1. Sales of Class-1 motor-driven cycles in 2006 should total 471,000 units, roughly equal to the 2005 level, reflecting firm demand for existing products.
    2. In 2007 the application of emissions countermeasures, accounting for both fewer models on the market and higher price tags, is expected to result in reduced sales of 451,000 units in total, a drop of 4.2% from 2006.
  3. Class-2 Motor-Driven Cycles (51cc-125cc)
    1. Sales of Class-2 motor-driven cycles in 2006 are estimated at 84,000 units, down 5.3% from 2005.  New models have made an impact, but overall sales are being held down by market saturation in urban areas in the current demand phase.
    2. In 2007 demand should rally a bit, with a focus on use for commuting.  Sales are forecast to hold steady at the 2006 level (84,000 units).
  4. Mini-Sized Motorcycles (126cc-250cc)
    1. Mini-sized motorcycle sales should finish 2006 at 98,000 units, down 4.0% from 2005.  Despite the positive impact of the creation of the new automatic-transmission license category, restrained buying has been a notable trend, linked to stricter parking regulations in urban areas.
    2. New models will be introduced in 2007 and progress in terms of infrastructure (specifically, an increase in parking availability) is anticipated.  Demand in this category is therefore expected to surge to 103,000 units, a growth of 5.1% over 2006.
  5. Small-Sized Motorcycles (over 250cc)
    1. Sales of small-sized motorcycles in 2006 are estimated at 83,000 units, posting a strong 8.0% rise over 2005.  This reflects greater awareness of the lifting of the ban on expressway tandem riding, the introduction of ETC for motorcycle users, the impact of new models, and other positive factors.
    2. In 2007 the continued impact of improvements in the user environment and new model launches should result in total sales in this category of 83,000 units, on a par with 2006.

[Data chart attached (PDF)]