2015 Japanese market (Part 1): Outlook and vehicle tax revision
Demand prior to VAT hike boosted 2014 sales to 5.56 million vehicles
The 2014 vehicle sales in Japan exceeded the forecast made by the Japan Automobile Manufacturers Association (JAMA) at the beginning of the year, 4,850,000 units, by 700,000 units, up 3.5% year-on-year (y/y). It was the record high in eight years, marking 5,560,000 units. The strong sales were supported by larger-than-expected, last-minute demand before the consumption tax hike in April, 2014, well enough to cover downturn after the last-minute buying and weakened demand after the tax raise. Brisk mini vehicle sales of 2.27 million units, a record high for the second straight year, also contributed to the increase.
The 2015 vehicle demand in Japan is expected to decrease due to the rtightened requirements on eco-car tax reduction programs and due to the tax hike. Therefore, related organizations and OEMs forecast y/y declines in sales between 4% and 10%; which means their predictions in total demand are between less than 5 million units and 5.3 million units. This report specifies 2014 vehicle sales and 2015 outlook, as well as the vehicle tax revision in Japan.
2015 sales outlook in Japan: five million units likely to be maintained
Regarding the 2015 sales outlook in Japan, Japanese OEMs are concerned about the continued downturn in demand after the tax-hike and about effects of the tightened requirements for eco-car tax reduction as well. (The details of eco-car tax reduction is explained later in this report.) Favorable economic circumstances, however, are expected to support new vehicle sales: lower oil prices to raise vehicle demand, weaker yen to restore corporate performances and higher real wages.
Japan Automobile Tyre Manufacturers Association (JATMA) announced its forecast for 2015 vehicle sales in Japan as 5,296,000 units, down 4% from its forecast for 2014. Japan Light Motor Vehicle and Motorcycle Association anticipates 2015 mini vehicle sales to fall largely by 16% y/y to 1.91 million units.
Toyota Motor Corporation announced in January 2015 that the Group plans to sell 2.1 million vehicles in Japan in 2015, 9% less than the previous year.
JAMA has not announced its 2015 sales forecast yet as of February 2, 2015.
2015 sales outlook in Japan
|Japan Light Motor Vehicle and Motorcycle Association||* Mini vehicles: 1.91 million units, down 16% y/y||* Sense of economic uncertainty to prevail in rural areas. * Downturn expected after the record high sales of 2,273,000 units in 2014.||Reported on Jan. 24, 2015|
|In the beginning of 2014, the association anticipated 2014 sales at 1.85 million units, far less than the result of 2.27 million units. 1.91 million units for 2015 seem to be a very cautious forecast as well.|
|Japan Automobile Tyre Manufacturers Association||Vehicle: 5,296,000 units, down 4% from its forecast for 2014||The association predicts that vehicle production in Japan should decrease by 4% y/y to 9,295,000 units and export should fall by 3% y/y to 4,323,000 units.||Announced on Dec. 11, 2014|
|Nikkan Jidosha Shimbun||* Total：5 million units, down 10.1% y/y * Non-mini vehicles：2.9 million units, down 11.9% y/y, including imports of 290,000 units, up 2.0% * mini vehicles：2.1 million units, down 8.0% y/y||* Still affected by downturn after the strong pre-tax hike demand in January to March 2014. * The tightened requirements for eco-car tax reduction to negatively affect non-mini vehicle sales. * Eco-car tax reduction applied for mini vehicles will make up for the rise in mini-vehicle tax. Suzuki and Daihatsu competition for market shares will raise the total sales.||Reported on Jan. 5, 2015|
Sources: Press release by Japan Automobile Tyre Manufacturers Association, Nikkan Jidosha Shimbun
Japanese OEMs' sales plans for 2015
|Toyota||* Toyota, Daihatsu and Hino in total: 2.1 million units, down 9% y/y||* Toyota: 1.45 million units, down 7% y/y Daihatsu: 600,000 units, down 15% y/y Hino: 50,000 units, down 9% y/y||Announced on Jan. 21, 2015|
|Fuji Heavy Industries (Subaru)||156,000 units, down 8% y/y, including 114,000 non-mini vehicles, down 10% y/y||* Subaru expects the Legacy Outback to contribute to full-year sales for 2015.||Announced on January 16, 2015|
|Japan Automobile Importers Association||* 300,000 units, slightly y/y increase from 290,000 units||* There is a good demand for high-value imported cars. * VW Japan plans to sell 70,000 units, up 4% y/y. Audi plans 33,000 units to 34,500 units, up 5 to 10% y/y. Other importers also plan sales volumes to exceed the previous year.||Reported on January 21, 2015|
Sources: Press releases, media reports
New vehicle sales in 2014 exceeds 5.5 million-unit mark first in eight years
In 2014, sales of new vehicles in Japan, passenger cars and commercial vehicles combined, increased for the third straight year to 5,563,000 units, up 3.5% y/y. It surpassed the 5.5 million-unit mark for the first time in eight years. The last-minute demand before the consumption tax hike in April 2014 was large enough to cover the following downturn and declined demand after the tax increase.
Mini vehicles marked the record high sales for the second consecutive year, with 2,273,000 units and an increase of 7.6% y/y. For the first time, the mini vehicle ratio of the total sales was beyond 40%. The Suzuki Hustler, the first sports utility vehicle (SUV) in the mini vehicle category launched in December 2013, contributed to the mini vehicle market with buoyant sales of 104,000 units. Aggressive new model launches by various OEMs also contributed. Mini vehicle sales in the single month of December reached 200,000 units. It was a great increase of 18.5% from December last year, when the pre-tax hike, last-minute surge in demand had already begun. Reportedly, "20% of the December sales were registered on the very last day." This indicates that each OEM might have registered its inventory as its own.
Sales volumes in Japan by vehicle type
|(in thousands of units)|
|Car||Standard||1,271||1,226||1,299||1,251||1,160||1,420||1,140||1,412||1,399||1,438||JAMA has not announced 2015 forecast as of Feb. 2, 2015.|
|Ratio of Mini (B/A)||32.9%||35.3%||35.9%||36.8%||36.6%||34.8%||36.1%||36.9%||39.3%||40.9%|
Sources: Japan Automobile Dealers Association (JADA), Japan Automobile Manufacturers Association (JAMA), Japan Light Motor Vehicle and Motorcycle Association
2014 sales volume in Japan by brand：Suzuki and Honda posts record-high market shares
In 2014, Suzuki Motor Corporation largely expanded its market share in Japan by 1.1 % point y/y to 14.2%, the highest in 20 years. It increased sales by 12.2% y/y to 787,000 units. The Hustler, launched in 2013, contributed to the increase with the buoyant sales of 104,000 units.
Honda also raised its market share by 1.1% point to 15.3%, exceeding 15% for the first time in 12 years after it had achieved 15.4% in 2002. Sales of the Vezel compact SUV and the N-WGN mini-vehicle supported the expansion.
Toyota, on the other hand, largely decreased its market share to 27.1%, the lowest in 20 years. In the expanding market, the OEM reported sales of 1,509,000 units, a 1.8% y/y decline.
|Mitsubishi Fuso (MFTBC)||61,171||71,414||50,520||40,522||22,104||24,761||27,032||34,715||36,731||42,509|
Source: JAMA Note: Figures in the "Others" column mostly consist of import brand vehicles.
Vehicle tax revisions: government tightens requirements for eco-car tax reduction
On January 14, 2015, Japanese cabinet approved the tax revision package for the fiscal year ending in March 2016 (FY 2015). The consumption tax raise to 10%, scheduled to be effective in October 2015, was postponed. Abolition and revision of vehicle-related taxes planned in the 10% consumption tax scheme were suspended as well. Requirements to be eligible for the eco-car tax reduction on the acquisition tax and the weight tax were tightened and the program period was extended. As for the mini vehicle tax, originally scheduled for a raise in April 2015, the cabinet introduced a new reduction program for a limited period of one year.
In April 2014, the government increased the consumption tax from 5% to 8%. Further raise to 10%, originally scheduled for October 2015, was suspended to April 2017.
Vehicle acquisition tax
The requirements were tightened to be eligible for the eco-car tax reduction program and the program period was extended up to March 2017. When the consumption tax is increased to 10%, the vehicle acquisition tax will be abolished. Currently, 3% acquisition tax is imposed on the acquisition price of private cars excluding mini-vehicles.
Eco-car tax reduction program: tightened requirements and period extension (April 2015-March 2017: Examples for passenger cars and others)
|Prior to revision||After revision|
|EVs and other green vehicles||Tax-free||EVs and other green vehicles||Tax-free|
|FY2020 fuel efficiency standards+20%|
|FY2020 fuel efficiency standards +10%||80% tax reduction|
|FY2015 fuel efficiency standards + 20%||Tax-free||FY2020 fuel efficiency standards||60% tax reduction|
|FY2015 fuel efficiency standards + 10%||80% tax reduction||FY2015 fuel efficiency standards +10%||40% tax reduction|
|FY2015 fuel efficiency standards +5%||20% tax reduction|
|FY2015 fuel efficiency standards||60% tax reduction|
|Note 1.||According to estimates by the Ministry of Land, Infrastructure, Transport and Tourims, FY 2020 fuel efficiency standards should be about 20% higher than the FY 2015 standards.|
|2.||"EVs and other green vehicles" include electric vehicles, fuel cell vehicles, plug-in hybrids, natural gas vehicles and clean diesel vehicles.|
Vehicle weight tax
The requirements were tightened to be eligible for the eco-car tax reduction program and the program period was extended to April 2017.
Eco-car tax reduction program: tightened requirements and period extension (May 2015-April 2017: Examples for passenger cars and others)
|Prior to revision||After revision|
|1st automobile inspection||2nd automobile inspection||1st automobile inspection||2nd automobile inspection|
|EVs and other green cars||Tax-free||Tax-free||EVs and other green cars||Tax-free||Tax-free|
|FY2020 fuel efficiency standards+20%|
|FY2020 fuel efficiency standards+10%||75% tax reduction||-|
|FY2015 fuel efficiency standards+20%||Tax-free||Tax-free||FY2020 fuel efficiency standards||50% tax reduction|
|FY2015 fuel efficiency standards+10%||75% tax reduction||-|
|FY2015 fuel efficiency standards+5%||25% tax reduction|
|FY2015 fuel efficiency standards||50% tax reduction||(FY2015 fuel efficiency standards)||(tax rate to be reduced to the initial tax rate of the "main rules."*)|
Note*："The temporary tax rate" will be imposed on vehicles not eligible for the eco-car tax reduction. For example, the weight tax rate is \4,100/0.5t-year for private passenger cars less than 13 years old with one-year inspection period. "The initial tax rate of the main rules" is imposed on eligible eco-vehicles (\2,500/0.5t-year). Under the FY 2015 Tax Reform, "vehicles satisfying the FY 2015 fuel efficiency standards" are not eligible for the eco-car tax reduction, but their tax rates are reduced to "the initial tax rate of the main rules."
After the consumption tax hike to 10%:
"From the standpoint to recover the policy incentive function under the FY 2020 fuel efficiency standards, the government will review the eligibility for the eco-vehicle tax deduction in line with introduction of the tax incentive based on fuel efficiency performance levels, And this fundamental structure will be perpetuated," according to the government.
The FY 2014 Tax Reform included a provision that the vehicle tax discount based on the environmental performances should be introduced when the consumption tax rate would be raised to 10%. The 10% consumption tax, however, has been postponed and this vehicle tax revision will be determined after the FY 2016 Tax Reform.
Vehicle tax based on the environmental performances (To be determined after the FY 2016 Tax Reform)
|FY 2014 Tax Reform||* Regarding taxation on vehicle purchase, deduction and exemption will be de considered, with the acquisition cost as the tax base.|
|* The tax rate will vary between 0 and 3% based on the compliance to fuel economy standards according to the Rationalization in Energy Use Law.|
|* The green tax program will mainly be targeted for vehicles not eligible for environmental performance-based tax.|
|FY 2015 Tax Reform||* FY 2015 Tax Reform stated, "Discussions will be based on the global environment surrounding the automotive industry, balance of the taxation and vehicle-related administrative services." This indicates that the Japanese government will consider other countries in an effort not to make significant difference from their vehicle taxes and also it will consider Japanese local governments that will lose some tax income due to abolition of vehicle acquisition tax.|
Extension and enhancement of the green tax program after the consumption tax hike to 8% (from April 2014 to March 2016)*
|EVs and other green vehicles||75% tax reduction|
|FY 2015 fuel economy standards + 20% AND FY 2020 fuel economy standards|
|FY 2015 fuel economy standards + 20% BUT not compliant with FY 2020 fuel economy standards||50% tax reduction|
|FY 2015 fuel economy standards +10%|
|FY 2015 fuel economy standards||Abolished|
|* Notes: 1)||The extra tax rate will be raised generally from 10% to 15% for diesel vehicles aged over 11 years and gasoline and liquefied petroleum gas vehicles aged 13 years or older (excluding EVs, transit buses, and trailers).|
|2)||The current extra tax rate (generally 10%) will be maintained for buses (excluding transit ones) and trucks (excluding trailers).|
Mini vehicle tax
The following was determined in the previous FY 2014 tax reform: the tax rate for personal-use, mini vehicles with four wheels or more and three-wheelers would be raised by 50% and the new rate would apply to vehicles newly acquired on April 1, 2015 and later; In FY 2016, the tax rate would be changed for mini vehicles with four or three wheels used for 13 years or longer since the initial inspection, and the new rate would apply from April 2016.
According to the FY 2015 tax reform, the special provision for green vehicle taxation will be available to mini vehicles with superior environmental performances. Limited to mini vehicles newly acquired during the fiscal year from April 1, 2015 through March 2016, mini vehicle tax for FY 2016 will be reduced.
Tax rate increase in April 2015 and later
|Current tax rate||From April 2015*||Age-based extra tax from April 2016**|
|Passenger use||Personal use||7,200||10,800||12,900|
|Cargo use||Personal use||4,000||5,000||6,000|
Notes: *Only applies to vehicles newly acquired in FY 2015 and later. **Applies to both already owned and newly acquired vehicles.
Tax reduction program for mini vehicles with superior environmental performances (Special provision for green vehicle taxation for mini vehicles acquired between April 2015 and March 2016)
|EVs and other green vehicles||75% tax reduction in general|
|FY 2020 fuel efficiency standards +20%||50% tax reduction in general|
|FY 2020 fuel efficiency standards||25% tax reduction in general|
Note: When introducing the environmental performance-based tax to vehicle tax and mini vehicle tax, this special provision for green vehicle taxation for mini vehicles will be reviewed together with the special provision for green vehicle taxation for vehicles.
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