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Auto industry deep in economic quagmire for both light and “luxury” cars

3, 24. 2009

   Decreases in new car registrations in Japan can not be stopped. According to the Japan Automobile Dealers Association, the sales of new cars, excluding light cars, in the country went down 32.4% on year in February 2009 to 218,212 units, worse than the sluggish sales registered in the previous month at a decrease of 27.9%. The decrease in February was the largest in 35 years for the month of February since 1974, when the nation was hit by the first oil crisis. Carmakers continued to reduce their productions to adjust their inventories. As there is no sign of an end to the sales decline, the production cuts are likely to be accelerated in the future.

Lexus down 63.0%

   The decreases in the cars sales in February were 40.7% for the ordinary cars (3-number vehicles) and 25.2% for small cars (5-numbers). By the carmakers, the decrease rates in car sales were 32.0% for Toyota (excluding Lexus), 21.1% for Honda and 35.2% for Nissan. Thus the rates were in the range of 20% to 30%. The Lexus registered an especially sharp sales decline of 63.0%. In general, luxury cars and large cars marked severe sales declines.

   Light cars have so far shown firm sales results in the past, but they also began to be faced by severer sales condition. According to the Japan Mini Vehicles Association, the decrease in the sales of such cars in February got closer to 10% at 9.8% to 162,370 units.

   The demand for cars sharply decreased over the world as the economic downturn, triggered by the financial crisis sparked by the bankruptcy of the major U.S. securities company Lehman Brothers in September of 2008, grew severer. To cope with the sales decline, the Japanese car makers have begun reducing their productions since last fall. The carmakers launched effort to adjust their rising inventories following the turn of the year. As a result, the total car production in the country went down by 41.0% in January from the same month of a year ago to 576,539 units. It was the largest decline in car production since 1967, when such statistics began to be taken. The carmakers were yearning somehow to switch over to production increase in order to turn the bad sales movement.

Sales decline so fast that production cuts can't catch up

   No matter how much the productions were reduced or efforts were made to adjust the inventories, however, the sales declines went on faster and they could not catch up. Not only for February, people in the car industry are of the opinion about March that "the future is entirely unpredictable" as said by an executive at a leading carmaker.

   The car sales in the United States also decreased by 41.4% in February from the same month of a year earlier to 688,908 units, going down below the 700,000-unit mark for the second month in a row. It was the lowest level in about 27 years since December 1981. The new sales by the Japanese carmakers in the United States also all went down by about 40%. Some of these decreases were by 39.8% to 109,583 units of Toyota and by 38.0% to 71,575 units of Honda.

   "We can only hope that the sales will go up in China and other emerging countries, but the markets in those countries are also likely to continue to be severe unless the U.S. economic condition recovers," an auto industry executive said. And this is a view held in common by many people in the industry. The production reduction of the car industry which is the major pillar of the Japanese economy is likely to accelerate in the future, overshadowing the future of Japan as a whole.

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