According to the Japan Automobile Manufacturers Association (JAMA), auto sales rose 0.4% year-on-year (y-o-y) in June 2014 to 452,555 units. We highlighted in April that we expected sales to take a hit after the hike in the national consumption tax on April 1 and, true enough, sales contracted in April and May ( see 'Auto Sales Set To Decline As Tax Hike Bites', April 4). That said, the decline in sales was not as sharp as we expected and this has prompted us to revise our full-year forecast upwards.
Initial signs indicate that the market is weathering the sales tax hike well and June sales figures have brought H114 sales to 3,005,806 units, an increase of 10.8% y-o-y. The double-digit increase is attributable to the strong Q114 as consumers frontloaded their vehicle purchases ahead of the sales tax hike. With demand remaining resilient even after the tax increase, however, we are upgrading our full-year vehicle sales growth forecast from 0.8% to 3.6%.
Mini Vehicle Segment To Remain Outperformer
Another factor that will support auto sales is the strong growth seen in the mini vehicle segment (engine displacement of 600cc and below). Monthly sales in this segment have been experiencing positive y-o-y growth since July 2013 and as the accompanying chart below highlights, sales even managed to eke out a small y-o-y gain in April and May 2014, the period after the consumption tax hike.
We expect mini vehicles to continue outperforming the broader auto market and with this segment making up 40% of the overall market, its positive growth trajectory will provide significant support to domestic carmakers.
Furthermore, our Country Risk team expects inflation to surge over the coming years as the Bank of Japan remains committed to its monetary easing programme ( see ' More Easing To Come Despite Inflation Surge', June 19). However, real wage growth remains elusive and as inflation rises faster than wages ( see 'Self-Sustaining Recovery Looking Unlikely', July 1),...
The Japan Autos Report features the latest data and forecasts covering production, sales, imports and exports.
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