JAIA Chairman Press Meeting (January 2009)

Following is a summary of the comments made by JAIA Chairman at a press meeting held on January 22 (Thu), 2009.


 Hans Tempel

[Business conditions]

The global economy is now facing depression of a magnitude that is described by some as ‘once in a century’, which has been triggered by the financial crisis spawned from the sub-prime woe in the US last year. The real economy worsened further with growing unemployment and contracting consumption, and the auto industry has been hit very hard by such situations.
As seen in the economic indicators issued by the government and Bank of Japan, the Japanese economy as well is facing difficulties stemming from the global economic downturn, with surge in the value of yen in the foreign exchange market directly impacting exporting industries of the country that depend on foreign demand, such as automobile and electric sectors, and we are seeing reductions in production and job opportunities expanding. We recognize that the impact on the auto industry, which has a broad base of peripheral businesses, is much larger than our imagination.

[Trend in domestic motor vehicle market]

Looking at the motor vehicle market in Japan, while the effects of economic slowdown were seen steadily and increasingly from the first half of last year, temporary tax cuts in April stemming from the muddle over provisional tax rates caused consumers to recognize anew the heavy burdens levied on automobiles.
In May onward, we saw a sharp rise in fuel prices, and combined with the global economic crisis mentioned earlier, the 2008 sales of motor vehicles excluding Kei cars and motorcycles declined to about 3.21 million units for the fifth straight year of negative growth and the lowest in 34 years since 1974. It was equivalent to the level immediately after the first oil crisis and certainly was a very serious result. From the peak in sales in 1990 (of about 5.98 million vehicles), demand has decreased by about 2.8 million units.

[Import car market: 2008 results]

Last year proved to be very difficult for the imported car industry.
Sluggish sales stemming from the short-lived surge in gasoline prices and others, were further worsened by a loss of consumer confidence due to the global synchronous recession in fall onward, bringing about an “exceedingly severe situation” with no signs of recovery in declining sales.
Sales of non-Japanese brand imports were down about 16 percent from the previous year to 193,000 units. Combining the results of Japanese brand vehicles, the total import market fell about 17 percent to 219,000 units for the second consecutive year of decline. It was the lowest level in 15 years since 1993 (when 201,481 vehicles were sold).

[Import car market: 2009 outlook]

In the immediate future, Japan’s economy will most likely continue to face the ongoing harsh environment with demand diminishing for sluggish consumer spending due to instable employment, deteriorating income conditions and other factors. In addition, looking at the vehicle sales, the severe situation is expected to persist given the huge impacts of declining birthrate, aging population and the young generation losing interests in cars.
The governments of the world’s major countries including Japan have hammered out urgent stimulus packages of considerable scales, and we believe that the effects of such measures will certainly be seen. The colder the winter is, the warmer the spring will be. We are determined to make vigorous efforts toward market recovery by taking this critical time as an opportunity for change and aggressively developing and introducing innovative technologies.
Recently, some non-Japanese automakers have been allowed to participate in the large-scale demonstration experiment (called ITS-Safety 2010) aimed at introducing the Driving Safety Support System, or DSSS, which is based on the ITS, and the Advanced Safety Vehicle, or ASV. It is the first time any non-Japanese carmaker will take part in such safety project, and together with Japanese manufacturers, they will strongly promote activities for practical applications.
Furthermore, JAIA has been offering every year a joint test ride for journalists as an opportunity to test drive new models of the member importers. This year, the event will be held at the Oiso Price Hotel for three days from the February Third. Through the event, we hope to convey attractiveness of imported cars as seen through professional eyes of reporters.

[About JAIA activities]

(1) Tax System

Amid the slowing vehicle sales, JAIA, as one of the means to go round a brick wall, has been calling for a drastic review of auto-related taxes together with other automotive organizations. As I said at the previous press meeting held in last summer, taxes levied on automobiles are complex and excessive. In addition, they are relatively high when compared to the US and EU nations. Such heavy tax burdens are imposed on car users only in Japan.
Certain progress has been made following the announcement by the Liberal Democratic Party in the end of last year of its Taxation Reform Outline, which indicated the direction of auto tax systems toward low-carbon and environmental protection. We should welcome such move; however, unfortunately, there is still a wide gap from the situation which we think is appropriate.
The idea of taxation toward low-carbon is indeed a global trend with some countries in the west already taking action for implementation. On this point, JAIA has been suggesting that any innovation, regardless of the kind of technology or fuel, that can contribute to the prevention of global warming should be introduced to the market on an equal-footing basis. We will continue to call on the government to achieve this “fuel neutral” and “technology neutral” position.
We will also take action toward the attainment of “reductions and streamlining” of auto-related taxes aiming at our fundamental goal of a drastic review of tax systems.

(2) Zoning Regulations

We will keep lobbying for a “review of zoning regulations”, which have been major impediments to installation and/or relocation of service shops by car dealers.
More than 25,000 people work in the import car industry including auto dealers, and creating an environment in which dealers can do their business without difficulty should help stimulate local communities and protect jobs. Above all, it is important to better serve our customers.

(3) Coordination with Pertinent Organizations

Since I assumed the position as JAIA Chairman in last May, I have been given opportunities to exchange views on a regular basis with executives of the Japan Automobile Manufacturers Association (JAMA) and Japan Automobile Dealers Association (JADA), as well as officials in charge at the Ministry of Economy, Trade and Industry (METI) and Ministry of Land, Infrastructure and Transport (MLIT).
Acting in harmony with other organizations and with support from the media reps as well as government offices, we will spare no effort to regain vitality in vehicle sales.

(4) Contributing to Japanese Economy through Growth of Imported Cars

We will be exerting more effort for further penetration and development of imported cars, and most of all, to be able to offer good products spawned from the time-honored brands with innovative safety and environmental features, which, we hope, Japanese customers will find attractive and enjoy. Through such activities, we expect to stimulate the auto market, and further making contribution to the recovery of Japan’s economy.