Japan's New Car Sales Drop 23.3% in July – Result Worse Than June

Japan’s new car sales figures seemed to be getting back on the road to recovery in June 2011 with a figure that was down 21.6% over the previous year, but now with July’s figures we can see that the recovery is not happening as quickly as hoped with July’s numbers down 23.6% year on year.

Two reasons are being put forward for this decline: One is that that the EcoCar tax incentives are not as favorable this year as last year. Secondly, that July this year had one less business day than last year.

In terms of decline, Toyota and Honda’s figures look particularly poor: Toyota was down 37%, and Honda 31.5%. However, the underlying numbers of vehicles sold by each company in July has actually improved since June. The reason that they are showing a bigger decrease in sales in the year on year comparison is that both Toyota (with the Prius and other hybrids) and Honda (with the Insight, Fit Shuttle Hybrid etc) were reliant on the favorable EcoCar tax incentive scheme to keep last year’s hybrid sales buoyant.

The  Japan Automobile Dealers Association (JADA) in figures announced August 1st stated that it had calculated the positive effect of this EcoCar tax incentive program as being worth about 1.5 million extra cars sold during that 1 1/2 year period. Since 4.5 million cars were sold in that period, they are saying that this incentive has been responsible for about 1/3 of all sales during that time.

On the other hand, JADA speculates that the incentives may well have simply shifted purchases earlier. In other words, people who were thinking about perhaps getting a new car during 2011 or 2012 instead decided to buy in 2010 to get a better price. JADA puts this effect at 40% of the 1.5 million additional sales. They estimate that this has reduced sales in 2011 by 250,000 vehicles, and in 2012 the loss of sales will be about 100,000 sales.

So only 60% of these 1.5 million extra sales were really “extra” at all. I would also add that it is not clear as to how many cars would have been sold anyway with the old tax regime in place. Although the savings may well have incentivized some purchasers into closing deals that they would not otherwise have considered, it seems reasonable to assume that many of these cars would have been sold anyway – they would have just cost their new owners a little more. On the other hand, the cost in revenue will have been quite substantial, so in my opinion it still remains to be demonstrated that this has been a good use of Japanese taxpayers money.

Source: Nikkei (Japanese-language)