Latest Japanese car market situation

Last year, for the first time in 72 years since they started operating, Toyota became the world number one in car sales beating US’s General Motors. However, on the other hand, because of the downturn in the world economy, their business plunged into the red for the first time after WWⅡ and their position is unstable. This is not only a problem of the company: it also means that the whole nation is “sinking” when the biggest and the strongest company is going into a stall.

For Japan’s economy, the thing which is detrimental is Toyota’s large-scale decreases in production. As it has been reported, Toyota is planning to cut their domestic production to half from the previous year between February and April. It will be 9000 cars per day, way below 11,000, which is the breaking even point. This is the same level as it was 30 years ago after the second oil shock.

Toyota’s 4 automobile assembly plants are also included in this plan, so the damage it is going to bring will be immeasurable in Aichi Prefecture where most affiliated business are situated. It is said “If Toyota coughs, the whole prefecture gets a cold”, in reality, it will not stop at a general cold but will be pneumonia. The data a Japanese think tank announced is more shocking: “If Toyota’s production cutback lasts for a year, the actual rate of growth of Aichi Prefecture will be -20%, which means that out of 36,500,000 million yen of the prefecture’s gross production, 7,000,000 million yen will be gone. The numbers of unemployed might reach 500,000 at worst. When the US economy was at its worst because of the previous world depression, their actual rate of growth was -13%. This means an even worse situation might be waiting to hit the prefecture.”

After hitting hard on Aichi Prefecture, it will quickly chill the economy of the whole country. An economist of another think tank calculated that Japan’s GDP had dropped by 2,000,000 million yen and 120,000 more people had lost their jobs within the last 3 months.

Unfortunately, the situation is more likely to be as predicted. The December 2008’s foreign trade statistics, quickly reported on the 22nd, was that car exports to the USA dropped by 52% and to the EU by 63% and it is strongly predicted that it will drop even further during the first half of this year.
Each car manufacturer, who export almost 60% of their domestic output, is expected to cut even more production and some think tanks are saying: “In Japan, car industry makes 3.2% of the country’s GDP whereas it is 0.8% in the USA, so the impact will be catastrophic. It is also going to widely affect other industries such as iron and steel, plastic, electric parts, machinery, etc. If we lose 1,000,000 million yen in car production, it is said that affiliated businesses are going to lose 3,100,000 million yen altogether. If this situation continues at Toyota for a year, the amount it is going to affect the country’s economy will be 2 to 3 times worse than Aich Prefecture’s and up to 20,000,000 million yen could disappear from our GDP. Actually, Bank of Japan lowered their provision of this year’s GDP to -2% and if you add this to last year’s -1.8%, the loss will be 20,000,000 million yen”.

Depending on what Toyota is going to decide, the loss to Japan’s economy could be bigger. Although the Aso government is going to inject 12,000,000 million yen as a part of some economic packages, it will only be a drop in the ocean. Mr Aso does not seem to have much knowledge in literacy and numeracy, but he needs to re-think about this fiscal action. Car manufacturers, who were standing independently without the government’s help until recently, cannot even think how they are going to survive through this business depression; which tells how serious the situation is.

By the way, Britney Spears, the US singer has changed her car to a Japanese car manufacturer Mitsubishi’s Eclipse. This is the 4th generation model, it first went on the market in 2005 and it is not an expensive car. Average people can afford it easily. It has a V6, 3.8L engine, 260 horse power, and costs US$28,500 for a new one. Britney has purchased a Toyota Prius before. Her father was said to have a big say when it comes to buying a new vehicle. I hope, the fact a celebrity like her using a Japanese car is going to bring a little bit of sales recovery in our industry.


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