2015 Japanese market (Part 1): Outlook and vehicle tax revision

Demand prior to VAT hike boosted 2014 sales to 5.56 million vehicles

2015/02/10

Summary

 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.


Related Reports:
2015 Japanese market (Part 2): Suzuki and Honda expand market share (Feb. 2015)

Japanese vehicle sales


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)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Forecast
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.
Small 2,090 1,908 1,654 1,550 1,480 1,508 1,246 1,603 1,473 1,423
Mini 1,387 1,508 1,447 1,427 1,283 1,285 1,139 1,558 1,690 1,839
Sub-total 4,748 4,642 4,400 4,228 3,924 4,212 3,525 4,573 4,562 4,700
Truck Standard 198 209 172 147 88 102 107 136 143 165
Small 352 355 293 250 181 188 185 227 236 253
Mini 537 516 473 443 405 442 382 422 423 434
Sub-total 1,086 1,080 938 839 673 731 675 785 802 851
Bus 18 18 16 15 13 13 11 12 11 12
All Total (A) 5,852 5,739 5,354 5,082 4,609 4,956 4,210 5,369 5,376 5,563
Non-mini 3,928 3,716 3,434 3,212 2,921 3,230 2,689 3,390 3,263 3,290
Mini (B) 1,924 2,024 1,920 1,870 1,688 1,726 1,521 1,979 2,113 2,273
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

Japanese market share (top 5 brands) 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.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Toyota 1,703,185 1,660,380 1,551,876 1,443,335 1,346,419 1,531,722 1,157,383 1,646,409 1,536,260 1,509,149
Honda 714,115 702,291 621,935 624,547 625,510 647,289 503,532 745,204 763,388 848,753
Suzuki 695,787 691,033 671,264 670,485 617,229 619,517 552,903 673,138 701,472 787,361
Daihatsu 601,154 622,484 626,847 642,464 596,215 608,510 548,279 677,171 662,690 708,179
Nissan 866,226 766,763 721,025 678,160 599,466 645,369 591,370 659,855 678,887 670,315
Mazda 286,919 269,152 254,061 244,532 204,296 223,747 189,925 218,361 228,089 224,359
Subaru 258,217 245,234 225,818 206,743 173,488 176,698 158,701 177,722 180,824 169,552
Mitsubishi 244,251 263,488 226,913 189,843 159,815 176,065 147,624 140,493 139,016 125,083
Isuzu 84,197 91,982 69,723 59,696 36,695 44,021 42,096 59,805 63,265 74,556
Hino 54,528 53,952 47,310 40,666 24,434 29,164 34,238 42,463 48,189 57,422
Lexus 10,293 31,097 34,803 25,945 28,167 33,365 42,365 43,657 46,772 44,246
Mitsubishi Fuso
(MFTBC)
61,171 71,414 50,520 40,522 22,104 24,761 27,032 34,715 36,731 42,509
UD Trucks 21,407 19,754 14,988 12,562 6,939 8,170 8,469 9,104 9,284 11,072
Others 250,617 250,482 236,565 202,735 168,479 187,738 206,302 241,623 280,646 290,331
Total 5,852,067 5,739,506 5,353,648 5,082,235 4,609,256 4,956,136 4,210,219 5,369,720 5,375,513 5,562,887

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.

Consumption tax

 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.

 

Vehicle tax

 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)*
  Current
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
(JPY)
  Current tax rate From April 2015* Age-based extra tax from April 2016**
Passenger use Personal use 7,200 10,800 12,900
Commercial use 5,500 6,900 8,200
Cargo use Personal use 4,000 5,000 6,000
Commercial use 3,000 3,800 4,500
Three-wheeler 3,100 3,900 4,600

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)
2nd year
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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