Japan’s April auto sales slump to 9-year low as virus saps demand
New cars at an industrial zone in Kawasaki, Japan. File/Reuters
Demand for cars has plummeted as people have been ordered to stay indoors in many countries to control the spread of the coronavirus, leaving motorways deserted and deep uncertainty about the longer-term impact on the global economy.
In the latest indicator of the widening impact of the virus on the world’s third-largest economy, vehicles sales fell 29% in April from the same period a year ago to 270,393, according to data from the Japan Automobile Dealers Association and an association for dealers of Japan’s “kei” minicars.
The last time sales were worse was in April 2011, when Japan was struggling to cope with the impact of a massive earthquake, tsunami and nuclear disaster a month earlier. Most cars sold in Japan are produced domestically.
Sales of minicars, which account for roughly four out of every 10 vehicles sold in Japan, tumbled 34% last month, the Japan Minivehicle Association said in a statement. It cited a fall in production of the pint-sized vehicles as the further spread of the virus prompted closures at parts supplier plants overseas, leading to procurement issues.
The association added that the government’s recommendations that people should stay at home barring essential outings, as well as uncertainties about the virus impact on household budgets, had led to a drop in visits to dealerships.
Demand for cars has plummeted globally as people have been ordered to stay indoors in many countries to control the spread of the virus, leaving motorways empty and deep uncertainty about the longer-term impact on the global economy.
Japanese automakers have taken a big hit to sales, with their global vehicle sales dropping 34% in March, figures showed earlier this week. Sales are set to fall further in the months ahead as the crisis continues.
Global vehicle sales by Japanese automakers dropped by 34% in March when the coronavirus outbreak spread worldwide, and are set to fall further in the months ahead as the crisis continues.
Analysts expect that this will put consumers off buying new cars, cutting 2020 global vehicle sales by around a third, compared with an 11% fall after the global financial crisis.
In a sign of the damage so far, Toyota Motor Corporation, Nissan Motor Company, Honda Motor Company and Japan’s four other major carmakers reported sales of around 1.82 million cars last month, down from around 2.77 million a year earlier.
Their combined global sales for the financial year ended March fell 7.3% to 26.5 million vehicles, their lowest in four years, calculations by Reuters based sales figures announced on Tuesday by individual automaker showed.
Toyota, Japan’s biggest automaker, sold 779,151 vehicles in March, down 22.6% from a year ago. For the year ended March, it sold 10,456,593 units, down 1.4%
Meanwhile Nissan sold 315,194 vehicles last month, a 43% drop from a year ago. In the year to March, its vehicle sales hit a nine-year low of around 4.8 million units as the pandemic piled pressure on Japan’s No. 2 automaker, which had already been struggling with falling sales and profitability.
Most automakers are preparing for a big financial hit from the coronavirus, as lockdowns in the United States and Europe have kept buyers out of dealerships.
But Nissan’s sales and profits had been falling even before the outbreak, forcing it to roll back on an aggressive expansion plan pursued by ousted leader Carlos Ghosn.
Chris Richter, senior research analyst at brokerage CLSA, expects that the size of last month’s fall in global vehicle sales will continue in the next year, and anticipates a 35% drop in sales for the current financial year ending March.
Plummeting sales in March suggest much weaker-than-expected annual profits at Japanese automakers, which will announce financial results next month. And it is likely to translate into annual operating losses at most Japanese automakers in 2020.
“Every automaker is going to have to do whatever they can to preserve fixed costs to try and contain the situation,” he said.
“For Nissan in particular this doesn’t come at a good time because it’s trying to recover from some bad financials, and it has an old product line up and needs to invest in new product technology.”
Reuters
