Summ Ind Jap 98

Summary of the Auto Industry in Japan

 The Year in Perspective

During 1998, the Japanese economy was knee-deep in recessionary turmoil
from the worst economic downturn in its post-war period. Consumer confidence
was shaken badly by a number of factors including the impact of the so-called
Asian flu and severe debt problems in the Japanese financial and banking
sector. While analysts suggest that the reforms required to bring about
a recovery in economic growth are difficult and daunting, signs that the
financial system is being restructured is evident in terms of foreign
ownership and direct investment in Japan’s banking, insurance and
financial services sectors. And the process of industrial restructuring
is also underway in the automotive sector, seen recently in the deeper
international alliances between Ford & Mazda and General Motors &
Suzuki, as well as the new alliance between Nissan & Renault.

The economic slump has also taken its toll on the domestic automotive
industry in Japan. Sales of all new vehicles fell 12.6% overall in unit
volume to just under 5.8 million from 6.7 million in 1997. Passenger cars
were down 8.9% to 4.0 million units, trucks were off 20.1% to under 1.8
million units, and buses slid 10.3% to 14,141 units. Sales of mini vehicles
were the only bright spot, showing remarkable strength in the last quarter
of 1998 to close up 4.1% overall at almost 1.56 million units.

Vehicle production in Japan fell to its lowest level since 1979 with
total output of just over 10 million units. Passenger car production dropped
5.1% to just over 8 million units, while truck output plunged 20.0% to
1.9 million units. Bus production was off 8.5% to almost 57,000 units.

Exports of finished vehicles from Japan to markets around the globe retreated
slightly in 1998 after sharp gains in 1997. Shipments fell 0.5% to 4.5
million units in total. Passenger cars were up 2.9% to under 3.7 million,
while trucks declined 13.4% to almost 796,000 units. By destination, export
shipments increased marginally to major markets in North America, Europe,
Latin/South America and Oceania, but dropped rather precipitously to Asia.

Import vehicle sales in Japan were hit hard by the slump in demand from
the ailing economy for the second year in a row. Sales registrations of
imported vehicles including models built overseas by Japanese automakers
posted a drop of 24.4%, from 364,882 in 1997 to 275,869 in 1998. Imported
passenger car sales fell 22.2% to 265,848 units, while trucks and buses
lost 57.2% over the previous year to 10,021 units. Foreign automakers
sales in Japan slipped 19.8% to 252,065 units, while the sales tally of
imports built overseas by Japanese automakers sank 53.0% to 23,804 units
from 50,601 in 1997.

The Outlook for 1999

Overall, the outlook for the auto industry, like the Japanese economy
as a whole, is still rather gloomy; although there are a few glimmers
that the bottom of the recession has been reached and a gradual recovery
may begin in the latter half of 1999. Some positive signs include a continuing
commitment by the Japanese Government to deregulation together with countermeasures
to stimulate economic activity, a 20% gain in the Nikkei in the first
quarter of 1999, and a number of new foreign direct investments into Japan,
notably in the investment banking and financial services sector, including
Merrill Lynch, Goldman Sachs, and Manulife, a Canadian insurance company.

In the auto sector, industrial restructuring will continue to impact
both production and sales as companies struggle to find the right balance
between global competition and cooperation and at the same time, to maintain
their focus on meeting the ever demanding needs of the consumer. Mini
vehicle sales in Japan have continued to show robust results over the
last six months of the fiscal year, and automakers have been aggressive
in introducing new eco-friendly models, such as direct injection engines
and hybrid (gas/electric) vehicles. And the 1999 Tokyo Motor Show in October
is an international showcase of new automotive technology and design that
generates widespread interest among Japanese consumers.

The forecast for motor vehicle demand in the Japanese market in 1999
optimistically projects some overall growth to just over 6 million units.
In the face of many challenges in the years ahead, Japanese automakers
intend to focus on three specific areas in 1999:

1. Revitalization of domestic demand
2. Environmental protection and vehicle safety
3. Promotion of international mutual understanding and co-operation.

Note: Percentage figures represent the change from
the preceeding year

Source: Japan Automobile Manufacturers Association

Source: Japan Automobile Manufacturers Association

Note: Percentage figures represent the changes
from the preceding year

Source: Japan Automobile Importers Association * Data included in European
/ U.S.A. figures