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Thursday, Dec. 29, 2011

Carmakers banking on incentives

Rebound after rough 2011 sorely needed to stop parts makers from exiting Japan, JAMA chief says


Staff writer

The Japanese auto industry hopes the government's new incentives for green cars will increase overall sales by about 900,000 vehicles in 2012 at a time when exports aren't likely to grow sharply amid the strong yen and overseas economic slowdown, the head of the industry's lobby group said.

News photo
Toshiyuki Shiga

"We hope the incentives will become a booster similar to the previous ones," Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association, told a group of reporters in a recent interview.

Approved by the government Dec. 20, the incentive program worth ¥300 billion is aimed at shoring up domestic sales of electric vehicles, hybrids and other environmentally friendly cars. The government also decided earlier in the month to extend a tax break for green cars for three years beyond its April expiration.

The incentives are needed by the auto industry, which has been hit hard by the yen's record rise and brief production curb after supply of parts was cut off by the devastating earthquake and tsunami in March as well as the massive flooding in Thailand in November.

The previous incentive program, which lasted about a year from 2009, and the tax break helped hike sales by 900,000 units.

The end of the program and the natural disasters threw a wet blanket on sales, with the overall figure in 2011 expected to mark 4.25 million units, 14 percent lower than the previous year.

"Demand in the domestic market will become more important next year because it is hard to forecast that exports will show significant growth," Shiga said, citing the yen's historic rise against other major currencies and slow economic growth overseas, particularly in Europe.

Shiga, also chief operating officer of Nissan Motor Co., said the industry will try to protect domestic production even amid the yen's surge but warned that an increasing number of Japanese parts makers have shifted their plants to other nations faster than many people expected.

So far, Nissan and Honda Motor Co. have pledged to maintain production of 1 million units at home, while Toyota Motor Corp. has said it will produce at least 3 million vehicles on its home turf.

"The number of auto parts made in Japan is decreasing," Shiga said. "The domestic market is hallowing out faster than expected.

"I feel a strong sense of crisis," he added.

The JAMA chairman is worried about an accelerating unemployment rate, particularly at second- and third-tier suppliers that are too small to shift their production plants.

These companies may start shedding their employees because they are losing orders from first-tier parts makers, many of which are moving abroad in line with the soaring yen.

This has been happening in a quick flurry, which makes the situation serious, Shiga added.

On the other hand, the natural disasters in Japan and Thailand taught Japanese carmakers it is important to prepare for emergencies by having sufficient inventories or having alternative suppliers lined up in advance, Shiga said.



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