Japanese auto sales more than halved in April

Japanese automobile sales more than halved in April – the biggest monthly drop on record – and are not expected to recover until late this year, raising concerns the country’s leading vehicle manufacturers will post losses for the first half of the year.

Sales of cars, trucks and buses fell 51 per cent to 108,824 units, the lowest level since records began in 1968, after the earthquake and tsunami that shook Japan in March halted production at leading automakers.

Demand was also hit by the termination last September of a government subsidy to encourage consumers to trade in their old vehicles for more environmentally friendly models.

Last month’s drop followed a 37 per cent monthly decline in March and marked the eighth consecutive month of falling sales, according to figures published by the Japan Automobile Dealers’ Association.

Analysts said the continuing damage to the industry’s production supply chain would likely see top automakers plunge into the red for the first half of the year.

“There is a strong possibility that many automakers will be lossmaking in the first half,” said Issei Takahashi, analyst at Credit Suisse in Tokyo, while given the recent data, that outcome is “obvious”, according to Masataka Kunugimoto, analyst at Nomura.

In April, the first month of the new fiscal year, Toyota’s sales in Japan fell 69 per cent. Nissan’s sales fell 37 per cent while Honda’s sales dropped 49 per cent.

Toyota and Nissan are scheduled to report full-year earnings next week.

Japanese automakers have been working to restore full production, but Toyota and Honda have said operations in Japan would not return to normal until late in the year.

Production has been constrained by shortages of semiconductors and plastic parts, in particular, after certain factories were damaged by the March 11 earthquake.

Toyota’s plants in Japan have resumed output but are only running at 50 per cent capacity. Nissan’s plants are also back on line but output has fallen 52.4 per cent since the earthquake, while Honda’s production in Japan is at about 50 per cent of its original plan, the company said.

Mr Kunugimoto said he expected overall sales in Japan to halve year-on-year in the first quarter to the end of June, due to production constraints, and to fall 20 per cent in the second quarter before picking up in the third and fourth quarters on recovery demand.

“It is impossible to say that we have hit bottom. Under the current circumstances, [with production infrastructure still disrupted] it is not possible to return to pre-crisis levels before the end of the year,” said Michiro Saito, JADA general manager.