Jan 20th - Toyota, Honda, Nissan, Carmakers Focus On Hybrids To Rev Domestic Sales

Leading Japanese automakers are seeking to expand their hybrid vehicle lineups to boost their slumping domestic sales following the end of a government program subsidizing purchases of cars deemed environmentally friendly.

Toyota-affiliated dealerships in central Tokyo continued to face weak demand in early January.

The end of the subsidy program in early September hurt domestic car sales, sending them down more than 20% year on year during the October-December quarter. Owing to the yen's strength, Japanese carmakers were unable to boost exports to offset the weak domestic sales.

Many car dealers and other industry insiders initially predicted sales would rebound from the slump in three or so months following the program's termination. But evidently this prediction was too optimistic.

And there have been no signs of recovery in the new year, either.

Incentives ineffective

Some dealerships have sought to rev up their sales by offering such incentives as free navigation systems and low-interest loans. But these incentives have been nowhere near as effective as hoped.

"The situation is beginning to get quite serious," said a representative of the Japan Automobile Dealers Association.

The government subsidy program boosted domestic sales 7.5% on the year to 4.95 million vehicles last year, the first annual gain in six years. But, for the second straight year, the sales again failed to hit 5 million units.

The Japan Automobile Manufacturers Association forecasts Japanese auto demand will weaken another 10% or so to 4.46 million units this year. That is below even the 4.6 million vehicles sold in 2009, when fallout from the global financial crisis sharply dampened demand.

The forecast level would be less than 60% of the peak demand reached in 1990.

Toyota Motor Corp. aims for sales of 1.3 million units in Japan this year, down 17% on the year. It expects a bigger fall than the industry average because its product lineup is skewed toward regular passenger cars and other vehicles, a class of vehicles larger than minicars that owners must register. Demand for the bigger cars has fallen much more sharply than demand for minicars.

Even in this tough environment, Toyota aims for domestic output of 3.1 million vehicles this year, limiting a year-on-year fall to 5%. It hopes to achieve the target by increasing exports from last year's level.

But President Akio Toyoda conceded the company will likely face such strong headwinds as the yen's sustained appreciation.

"The yen's current strength is imposing such a heavy financial burden that no company can bear it for long," he said.

Hybrid hopes

Against this backdrop, Toyota is scheduled to add a station wagon model to its lineup of Prius hybrid vehicles as early as this summer.

Similarly, Honda Motor Co. will soon broaden its hybrid car offerings, adding station wagon and minivan models, so that hybrid sales will account for more than 20% of its total sales in Japan next fiscal year.

The rolling out of new hybrid models -- a type of car for which tax breaks are still given through spring 2012 under another government program -- is intended to boost slumping domestic sales.

It also points to the fact that along with fuel-efficient small cars, hybrids have become strong sellers in an otherwise weak domestic market.