JAIA Chairman Press Meeting (July 21, 2016)

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Chairman's Press Conference July 26, 2016

JAIA Chairman Press Meeting (July 21, 2016)
JAIA held a Chairman’s Press Meeting on July 21, 2016 Following is the speech by Chairman Kronschnabl.

Mr. Peter Kronschnabl

First and foremost, I would like to offer my deepest condolences to those who lost their lives due to The 2016 Kumamoto Earthquake and express my heartfelt sympathy to those people who are suffering from the disaster. I truly hope that they will be able to return to their normal life as quickly as possible.

1. Result of 2016 1H

Looking back, sales of foreign-brand imported 4 wheeler vehicles in last year (2015) was about 285,000 units, which was down 1.6 percent from the previous year, but it was the fourth highest figure of all time.

This year, the result of the first quarter to March was down about 4 percent year-on-year, but in April onward, the trend was completely reversed as the imported vehicle sector continued to post year-on-year growth of more than 6 percent in three months straight.

Sales of foreign-brand imports through the first half of this year, from January to June, was up 0.6 percent to about 145,000 units, and total imported vehicle sales including Japanese brands was up 1.9 percent to about 170,000 units.

The share of non-Japanese brands to the total registered vehicles (about 1,642,000 units) was 8.9 percent (same with 8.9 percent in the previous year) but the share to the registered vehicles and Kei-cars combined (about 2,547,000 units) was 5.7 percent and still smaller share, comparing with the share of imported vehicle in other countries.

In addition, next generation vehicles of foreign brands are selling well and, in particular, sales of clean diesel passenger cars continued to post year-on-year growth for the first half of 2016, the growth rate was 99.1 percent from a year ago, accounting for 14.6 percent of total foreign-brand vehicles, which is significantly higher than 7.4 percent share in the previous year.

Further, as to the trend in sales by price range, new vehicle sales of high-end models priced at 10 million yen or more continued to be strong, posing a year-on-year increase of 18.1 percent for the first half of this year.

2. Outlook of 2016 2H

Our outlook on the second half of this year is that the trend of positive growth since April will continue. We understand that, with launches of more new models, JAIA members will be vigorously upgrading their product lineup, including next generation vehicles equipped with latest technologies and features.

As I said at the press conference on January 21 of this year, JAIA members will be looking for sales of 300,000 units of foreign brand 4 wheeler vehicles in 2016.

However, we expect that, following the worldwide decline in stock prices after a majority of voters supported the UK’s departure from the EU, the entire motor vehicle market of Japan will continue facing uncertain conditions in the months to come.

And, we are particularly concerned that, due to another two and a half year delay until October 2019 in the increase in Consumption Tax to 10 percent, the abolition of Automobile Acquisition Tax is also likely to be postponed. The heavy tax burden on car uses will therefore continue.

At any rate, in order to accurately address the diversifying needs of our customers, JAIA members will provide Japanese customers with a wide variety of attractive imported four-wheeled vehicles and motorcycles equipped with excellent features that reflect the diversity of the motor vehicle culture of the various countries in the world.

Furthermore, in order to assist JAIA members in introducing attractive new models, JAIA will do our best to ensure that imported vehicles will be able enjoy, at any time, fair and equal access to the market by promoting the harmonisation of technical requirements between Japan and her principal trading partners.

3. Key Activities of JAIA

1) Activities on Request for Taxation Revision

JAIA, in cooperation with other automotive associations, has been calling for the “streamlining, reductions and fairness” of the taxes relating to automobiles.

For example, we have strongly requested the abolition of Automobile Acquisition Tax, which constitutes double taxation with Consumption Tax, and the same of Tonnage Tax, which has lost its rationale after inclusion in the general revenue. The Taxation Revision Outline issued at the end of last year specifies that Acquisition Tax should be abolished as of the Consumption Tax hike to 10 percent. Since it has been announced subsequently that the increase in Consumption Tax should be postponed until October 2019, we will have to wait until then to see Acquisition Tax eliminated.

Also with respect to Tonnage Tax, the Outline states that the criteria for Eco-car Tax Incentives will be reviewed and specific conclusions drawn during the fiscal year 2017 Taxation Revision, while clearly indicating that Tonnage Tax will continue. Here, we are seriously concerned that Tonnage Tax, which lost its fiscal rationale after its inclusion in general tax revenue, will be retained as a hypothecated tax for the maintenance and upgrading of road infrastructure.

Therefore, JAIA will request a guarantee that Acquisition Tax will be abolished when Consumption Tax is raised to 10 percent and a drastic review of Tonnage Tax, including its elimination.

In addition, concerning the overall tax Incentives, including the exemption/reduction of Tonnage tax, Acquisition Tax and Automobile Tax, JAIA strongly advocates that these very complex schemes applied at both the national and local levels should be streamlined and unified in a user friendly manner. We will enhance our activities to achieve a fair auto-related tax system that promotes consumers’ free choice.

2) Activities in Technical and Environmental Fields

In order to facilitate the introduction into the Japanese market of imported vehicles equipped with leading-edge safety and environmental technologies, JAIA has been proposing the international harmonization of technical and environmental regulations. Let me mention several areas of keen interest for JAIA.

(1) International Whole Vehicle Type Approval (IWVTA)

Firstly, on International Whole Vehicle Type Approval (IWVTA), thanks to the initiative of MLIT, the UN/ECE WP29 is now working on the IWVTA, an international scheme for vehicle certification. Revisions to the 1958 Agreement were approved at the WP29 meeting of this June, and when IWVTA is fully established, certification work in Japan will be significantly streamlined for a vehicle approved under IWVTA. JAIA has high hopes that this will eventually reduce the cost of regulatory compliance in Japan.

With the amendment of the Road Vehicles Act in June last year, Japan adopted this April a new certification system that implements part of IWVTA. We hope that the UN Regulation concerning IWVTA (“R0”) will enter into force in 2018.

(2) Acceptance in Japan of Daytime Running Lamp

Secondly, concerning the acceptance by Japan of Daytime Running Lamps, as a result of a long-standing request by JAIA, the ban on the use of Daytime Running Lamps will be lifted, and we are pleased that Japan’s acceptance of the relevant UN regulation will allow the use of DRL in Japan by the end of 2016.

We hope that international harmonization of other Japan-unique regulations will further accelerate.

(3) Emission and Fuel Efficiency Test-related

Thirdly, on Worldwide Light Vehicle Test Procedures, or WLTP, JAIA welcomes Japan’s policy to adopt WLTP, for emissions and fuel efficiency as developed by UN WP29.

Since emissions and fuel efficiency performance are used also as criteria of the Tax Incentives, we understand that in future WLTP, rather than JC08 as at present, will be used to assess performance. The use of WLTP-based testing procedures without any adjustment of the target stringency values will make it more difficult to qualify for Eco-car Tax Incentives. JAIA will work closely with the ministries concerned to ensure that the transition to a new testing procedure will not disrupt the application of incentives.

(4) On Board Refueling Vaper Recovery

Fourthly, discussions are underway to control refueling vapor. Two approaches are under consideration: the use of Stage II on the gas station side or ORVR (On Board Refueling Vaper Recovery) on the vehicle side. JAIA is of the view that Stage II would provide a quicker and more cost effective solution.

(5) Fuel Efficiency Testing

Fifthly, following the recent cases of illegal fuel efficiency testing by two Japanese automakers, MLIT has confirmed that the tests conducted by all foreign brand vehicles have been carried out in accordance with the relevant laws and regulations. On 10 June, MLIT announced future measures to prevent non-compliance with the authorised testing procedures.

(6) Automated and Connected Driving

Sixthly, concerning Automated and Connected Driving, expectations are recently growing for improved motor vehicle safety, easing traffic congestion and reducing environmental pollution. Various efforts are being made on a global basis to advance technologies for achieving the practical application of safe driving assistance systems and for achieving the ultimate goal of fully-automated driving systems.

In Japan, under the Cross-ministerial Strategic Innovation Promotion Program (known as SIP) led by the Cabinet Office, discussions are being held by all the ministries concerned on fundamental policies for technological development, while identifying areas of cooperation and competition for auto driving. Also, a study group of METI and MLIT, in which JAIA participates as an observer, is examining future automated and connected driving requirements.

On the other hand, toward practical application of automated and connected driving in Japan, large-scale demonstrations will be held in fiscal year 2017 for the purpose of identifying and addressing specific issues in terms of legal schemes and technologies. Also, Japan is leading the standardization work on the development of dynamic maps, which are one of the key factors of autonomous driving.

JAIA will follow closely these developments in Japan and share information with our members, and try to ensure the introduction and revision of regulations and schemes in a globally-harmonized manner.

3) Motorcycle Activities

First, we have made significant progress in the area of international harmonization of regulations. For example, for the long-sought issue of noise regulations, the relevant announcement was revised in April to adopt reference values for proximity exhaust noise, achieving complete harmonization of regulations.

Secondly, we have also made significant progress in revitalizing motorcycle market of Japan. For example, this April, we held the Second JAIA Motorcycle Test Ride with improvements from the last time. As a result, the event attracted 252 participants from various media, which is 30 percent higher than last year, and combining motorcycle and non-motorcycle, 74 media participated this year, an increase of 16 media from the previous event. The number of test-ride vehicles also increased by 28 units to 77. As such, we were able to widely promote among the users appeals of imported motorcycles through coverage in publications, television and the like.

JAIA will continue and upgrade JAIA Motorcycle Test Ride in the next year onwards.

4. Closing

JAIA is determined to spare no effort to contribute further to the sustainable development of Japan’s motor vehicle market, collaborating with other auto-related organizations such as ACEA, AAPC and JAMA, as well as the government bodies concerned.