Analyst Insight by Neil King.
Total passenger car sales declined over 2004-2009 in Japan but demand for standard cars has held up well and actually set a new record in 2010, even outselling mini cars for the first time ever. Given the general popularity of larger cars among older people, the cloud that is the ageing of the Japanese population appears to have a silver lining, albeit a thin one.
The Japanese passenger car market has essentially been declining for two decades due to the urbanisation of Japan's static population and lacklustre economic growth. Faced with declining demand at home, the disastrous supply chain impact of the earthquake and tsunami in March 2011 and the strength of the yen, it is no surprise that domestic carmakers are looking elsewhere for sales and are investing in capacity expansion in countries such as Mexico, India and Indonesia.
JAMA, Euromonitor International.
However, as supply normalises after the earthquake and tsunami, this bodes well for sales in the short term. Despite the saturation of the market and the lack of population growth, there are even opportunities over the long term.
Whereas Japan's ageing population is generally viewed as a negative factor, consumer preference is for larger cars, and although total passenger car sales declined over 2004-2009, demand for standard cars (with an engine capacity of over 2,000cc) has held up well. In fact, sales of standard cars were at their highest ever in 2010, even outselling mini cars (660cc and below) for the first time and challenging demand for small cars (661-2,000cc).
There is actually a reasonable correlation between the population of Japan that is aged over 55 and standard car demand. Similarly, demand for mini cars has been flat, in line with the size of the population aged 35-54, while small car demand and the size of the younger population of driving age (18-34) have both been declining since 2002.
JAMA, Euromonitor International
Whereas the size of the youthful population is forecast to continue to decline and the middle-aged population is predicted to remain flat, the population aged over 55 is expected to expand further and thus support demand for standard cars.