We reiterate our pessimistic outlook for Japan's domestic auto sales, as the sales tax hike (from 5.0% to 8.0%) in April resulted in auto sales growth being negatively impacted, prompting us to downgrade our 2014 overall vehicle sales forecast to 2.9% from 3.6% previously. In August, Japan saw the largest decline in auto sales since 2011, as the Japan Automobile Manufacturers Association (JAMA) announced that auto sales tumbled 9.1% year-on-year (y-o-y) to 333,471 units. The slowdown appears to be broad based, as passenger car sales and commercial vehicles (CVs) declined 9.5% y-o-y and 7.1% y-o-y respectively in August.
For the first eight months of 2014, passenger car sales grew 7.1% y-o-y, largely driven by the sales surge between January and March, where consumers rushed to make purchases before the sales tax hike in April. While mini car sales growth has remained robust in 2014, and has generally outperformed the passenger car segment over the past few years, we believe a shift in the government's stance on the traditionally popular 'kei' car casts doubt on the segment.
As with our pessimistic outlook for passenger cars, we do not have a favourable view on the CV segment, and have revised our 2014 CV sales growth forecast to 5.1% from 6.8% previously. Although heavy CV sales remain insulated from a weakening economy (8M14 sales have grown 15% y-o-y), growth for a relatively sluggish light CV segment has offset positive results in the heavy CV segment, as light CV sales for 8M14 have grown 4.6% y-o-y to 557,332 units, bringing 8M14 sales growth for the overall CV segment to 6.4%.
We believe auto production will also see a gradual decline over the coming years, as Japanese carmakers such Toyota and Honda find an increasing need to localize their manufacturing in growing markets such as India and Indonesia, which will also serve as an export hub in the coming years. However, we do not expect an exodus of production, and we see carmakers tapping on excess...
The Japan Autos Report features the latest data and forecasts covering production, sales, imports and exports.
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