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New car registrations in Japan certain to dip below 5 million units for first time in 31 years

1, 16. 2009

   Japan's new car registration for 2009 is forecast at 4.86 million units (including mini cars), dipping below the 5 million mark for the first time in 31 years since 1978, according to figures compiled by the Japan Automobile Manufacturers Association (JAMA). This is due mainly to the world economic slowdown triggered by the financial crisis started in the United States. While there was no sign of car market recovery, the large-scale production reduction and personnel cuts accelerated by Japanese carmakers toward the end of 2008 are likely to expand further after the turn of the year.

Down nearly 40% from peak of 7.78 million units registered in 1990

   It would be the fifth consecutive year that the annual domestic new car registration marks a decrease from the previous year in 2009. As a result, the new car sales in 2009 might come out to be nearly 40% less than the peak sales of 7.78 million units registered in 1990.

   The domestic new car registration had continued to grow since the time of fast economic growth in the second half of 1970, when automobiles popularized among ordinary families, and it hit the peak in the time of the bubble economy in 1990. After that, however, the sales began dwindling and had continued to decrease from the previous year since 2005. This is because of the decrease in car-driving people reflecting the falling birthrate and aging population. Another reason is that young people are spending less money for cars and the people in general are shunning cars because of the popularization of cell phones and other type gadgets.

   The auto industry has been doing its best to put a stop to the declining trend. But the worsening financial crisis started by the bankruptcy of the U.S. leading securities house Lehman Brothers in September 2008 spurred the car sales decline. The new car registration in October of that year marked a two-digit decrease of 13.1% on year. In November, decrease rate got close to 30% at 27.3%.

   The watered down consumption trend as a result of the financial crisis is pushing the car sales decline further. Especially hard hit by the sales decline are low-mileage large cars and luxury cars. The car market is "unprecedentedly severe without any sign of recovery in the near future. We still have to go on a rough road before a recovery in demand," said Satoshi Aoki, chairman of JAMA who is concurrently chairman of Honda Motor Co., dismayed by the unpredictable future.

Vicious cycle of employment cuts leading to further consumption shrink

   Amid the unpredictable demand, the carmakers are hurrying their production reduction and personnel cuts. The production reduction of the 12 major carmakers in the country during the current fiscal year is expected to reach a total of about 2.3 million units, or about 10% of the production during the previous fiscal year. Reflecting the production reduction, the dismissal of non-regular employees revealed by the 12 carmakers as of the end of 2008 had exceeded 17,000 workers. While Toyota Motor Corp. will reduce the number of its temporary workers by 6,000 by the end of March, Nissan Motor Co. also announced its plan to dismiss all of its 2,000 workers provided by staffing agents by March, making the situation worse.

   Major manufacturing companies outside the auto industry also expressed a view that the aggravating employment condition would cause decreases in consumption further and "we would be trapped in a vicious cycle."

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