March 13, 2008

Forecast for Japan’s Vehicle Demand in Calendar Year 2008

Motor Vehicles

  1. Total Demand for Passenger Cars & Commercial Vehicles
    1. Total demand for passenger cars and commercial vehicles in calendar 2007 is estimated at 5.38 million units, a decline of 6.2% from the previous year. Demand for passenger cars is estimated at 4.42 million units (down 4.7% from 2006); for trucks, at 945,000 units (down 12.5%); and for buses, at 15,700 units (down 10.8%). Mini-vehicle sales are projected at 1.93 million units (down 4.6% from 2006).

      Demand for passenger cars was higher in the second half of 2007 compared to the same period a year earlier owing to the introduction of many new models and model changes, but overall demand still remained lower than in the previous year. Demand for standard and small trucks declined substantially, owing to a drop in the demand for replacement vehicles in response to Japan’s Motor Vehicle NOx & PM Emissions Act. Excluding mini-vehicles, total demand for passenger cars and CVs in 2007 is estimated at 3.45 million vehicles (a drop of 7.1% from 2006).

    2. The following assumptions are being made for 2008:
      • Sustained growth in exports is projected as a result of the continued strong performance of the Chinese and other emerging economies, and despite the slowdown in the U.S. economy.
      • There should be continued modest growth for the Japanese economy, with solid capital investment resulting from strong corporate performance. Nevertheless, only a modest increase in consumer spending is anticipated, owing to the slow recovery in personal income and employment. Meanwhile, surging oil prices will drive up prices overall. Furthermore, there will be a sustained decline in the demand for replacement vehicles to comply with the national Motor Vehicle NOx & PM Emissions Act.

      In view of the foregoing, total demand for passenger cars and commercial vehicles in 2008 is projected at 5.32 million units, down 1.2 % from 2007, breaking down into 4.41 million passenger cars (down 0.3% on the year); 895,000 trucks (down 5.3%); and 14,400 buses (down 8.3%). Excluding mini-vehicles, whose demand is anticipated at 1.89 million units (down 2.0%), total demand is therefore projected at 3.43 million units (a drop of 0.8% from 2007).

  2. Standard and Small-Sized Passenger Cars
    1. Sales of standard and small-sized passenger cars in 2007 should total 2.97 million units, a decline of 5.2% year-on-year. The main factors behind this forecast are as follows:
      • Rising sales in the latter half of 2007, owing to the introduction of new models and model changes and a shift in demand from minicars (whose sales surged in 2006), could not counteract the negative growth in the first half of the year; and
      • Fuel prices surged and no significant recovery was seen in personal income or in consumer confidence.
    2. For 2008 the demand forecast in this category is 2.97 million units, showing no change from the preceding year. The impact of new models and model changes that was registered in the latter half of 2007 should continue to make itself felt during the first six months of 2008.
      • 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 2007 are estimated at 1.45 million units, down 3.6% from the previous year. The main factor behind this decline is the diminishing market impact of new models and model changes introduced in 2006.
    2. For 2008, registration trends indicate that although buyers will continue to lean towards minicars, the shift to this segment will weaken. As a result of a combination of this and other factors, total demand in this category in 2008 is forecast at 1.44 million units, down 0.9% from 2007.
  4. Standard Trucks
    1. Standard truck demand in 2007 is projected at 172,000 units, a 17.8% plunge from the previous year owing to a significant decline in replacement demand for vehicles complying with the Motor Vehicle NOx & PM Emissions Act. In this category, the demand for large and medium-sized trucks is forecast at 89,000 units, plummeting 18.8% from the 2007 level.
    2. In 2008 sales are projected at 160,000 units, for a 7.0% decline year-on-year, in anticipation of a further decline in demand for replacement vehicles complying with the NOx and PM emissions regulation.
  5. Small Trucks
    1. Small truck sales in 2007 are estimated at 296,000 units, down 16.6% on the year, owing to a significant decline in replacement demand to comply with the Motor Vehicle NOx & PM Emissions Act.
    2. Owing to a continuation of that trend, demand in this category in 2008 is forecast at 283,000 units, down 4.4% from 2007.
  6. Mini-Trucks
    1. Mini-truck demand in 2007 should total 477,000 units, a decline of 7.6% from the previous year. This is attributed to changes in market structure caused by decreases in the ranks of small retailers and farmers, who are the primary users of these vehicles, and to the flat economic outlook for the small-retail and agricultural sectors despite the anticipated modest recovery in the national economy overall.
    2. In 2008, owing to a continuation of the aforementioned trends, demand in this category is forecast at 452,000 units, a decline of 5.2% from 2007.
  7. Large Buses
    1. Large bus demand in 2007 will likely not exceed 5,300 units, a year-on-year drop of 12.6%, owing to a notable decline in replacement demand to comply with the Motor Vehicle NOx & PM Emissions Act.
    2. For the same reason, demand in 2008 is projected at 4,800 units, down 9.4% from 2007.
  8. Small Buses
    1. Demand for small buses in 2007 is expected to total 10,400 units, a drop of 9.8% from the previous year. The main factor behind this decline is the waning demand for replacement vehicles in response to the national NOx and PM emissions legislation.
    2. This same trend is behind the forecast that demand in this category in 2008 will stand at 9,600 units, a decline of 7.7% compared to 2007.

Motorcycles

  1. Total Demand for Motorcycles

    The motorcycle environment in Japan in recent years 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 electronic toll collection (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 2007 are estimated at 723,000 units, down 2.0% from the previous year owing to year-on-year declines for both Class-1 motor-driven cycles and mini-sized motorcycles.
    2. In 2008 mini-sized and small-sized motorcycles should post gains on the previous year’s levels. However, year-on-year declines are forecast for Class-1 and Class-2 motor-driven cycles, with total motorcycle demand therefore projected to dip to 701,000 units, down 3.0% from 2007.
  2. Class-1 Motor-Driven Cycles (50cc & under)
    1. Sales of Class-1 motor-driven cycles in 2007 should total 460,000 units, down 3.8% from the previous year. This decline is partly the result of structural shifts such as the drop in the number of new licensees and new purchasers, and partly the result of two additional factors: higher vehicle price tags brought on by stiffer emissions regulations, and the smaller number of new models on the market.
    2. In 2008 the aforementioned structural shifts are expected to continue to have an adverse impact on sales, resulting in a total projected demand in this category of 434,000 units, down 5.7% from 2007.
  3. Class-2 Motor-Driven Cycles (51cc-125cc)
    1. Sales of Class-2 motor-driven cycles in 2007 are estimated at 96,000 units, a 16.8% rise over the previous year. The two main factors behind this growth are increased personal use (e.g., for commuting to work and school) and increased use in business operations.
    2. In 2008 the demand for personal use should remain solid, but the outlook for corporate demand is not clear, resulting in a total demand forecast in this category of 95,000 units, down 1.0% from 2007.
  4. Mini-Sized Motorcycles (126cc-250cc)
    1. Mini-sized motorcycle sales should finish 2007 at 84,000 units, dropping 11.8% from the preceding year. This category enjoys strong demand mostly from commuters in urban areas. The main factor behind the decline is the lack of motorcycle parking bays. However, there has also been a significant negative impact on demand caused by higher vehicle prices attributed to stiffer emissions regulations and by the smaller number of models on offer.
    2. In 2008, the introduction of new models and the projected greater parking availability should push sales in this category to 88,000 units, up 4.8% from 2007.
  5. Small-Sized Motorcycles (over 250cc)
    1. Sales of small-sized motorcycles in 2007 are estimated at 83,000, marking a mild 0.7% rise over the previous year. Demand was solid as a result of enhancements made to the driving environment and the impact of new model launches.
    2. In 2008, the impact of stiffer emissions regulations is expected to be counteracted by solid demand among hobbyists in the middle-aged and older segments of the population, resulting in sales forecast at 84,000 units, up 1.2% from 2007.

[Data chart attached (PDF)]