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Japan Autos Report Q1 2012
Business Monitor International, Nov 2011, Pages: 56
Japan Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Japan's automotive industry.
Following the widespread disruption to the Japanese autos industry caused by the March 2011 earthquake and tsunami, the Japan Automobile Dealers Association reported the first increase in sales of cars, trucks and buses in 13 months in September 2011, as sales increased 1.7% year-on-year (y-o-y) to 313,790 units. BMI points out that there are a number of challenges ahead and it is too soon to speak of a full recovery. Firstly, the data do not include sales of mini-vehicles (those with engines under 0.6 litres). With this category included, sales are still down y-o-y by 2.07%. Another reason to remain cautious when speaking of a recovery is the base effect. Sales in September 2010 were particularly poor, coming on the back of the government's withdrawal of incentives on smaller models. That month's sales, including minivehicles, were down 1.23%, taking some of the shine off September 2011's relative performance.
Total sales for the first nine months of the year are down by 23.7% y-o-y and this has prompted a slight upward revision of our forecast for the year. We now expect 2011 to end with total sales by domestic carmakers down by around 17%. Within that total we see still see the commercial vehicle segment as the relative outperformer, as trucks will be in demand for the rebuilding process while buses may be required to replace any lost or damaged public transport fleets. We expect this trend to play out until around 2014, when passenger car growth will return to being marginally stronger with the return of some consumer confidence to the market.
Adding to the pressures on carmakers, the sustained strength of the yen has started to force domestic carmakers to rethink their domestic production strategies, posing serious downside risks to BMI's already conservative forecast for average annual output growth of less than 5% for 2013-2015. Although we expect to see a recovery in domestic production in 2012 as carmakers fulfil orders disrupted by the March 2011 earthquake and tsunami, the soaring cost of exports means a shift in longer-term strategy for even the most committed national brands.
While most companies are still in the process of making decisions related to their production strategy, currency concerns certainly constitute a risk to our output forecast and will be closely monitored. Although most national carmakers commit a certain level of output to their domestic operations, the situation could get worse before it gets better. BMI's Asia team sees the currency potentially appreciating to JPY72.50/US$ as of December 2011 (revised upwards from JPY76.65/US$ previously), which could be a tipping point for more overseas activity.
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