Kimiyuki Suda should be a perfect customer for Japan’s carmakers. He’s a young (34), successful executive at an Internet-services company in Tokyo and has plenty of disposable income. He used to own Toyota’s Hilux Surf, a sport utility vehicle. But now he uses mostly subways and trains. “It’s not inconvenient at all,” he says. Besides, “having a car is so 20th century.” Suda reflects a trend in Japan; the automobile is losing its emotional appeal, particularly among the young, who prefer to spend their money on the latest electronic gadgets. While minicars and luxury foreign brands are still popular, everything in between is slipping. Last year sales fell 6.7 per cent—7.6 per cent if you don’t count the minicar market. There have been larger one-year drops in other nations: sales in Germany fell 9 per cent in 2007 thanks to a tax hike. But analysts say Japan is unique in that sales have been eroding steadily over time. Since 1990, yearly new-car sales have fallen from 7.8 million to 5.4 million units in 2007. Alarmed by this state of decay, the Japan Automobile Manufacturers Association (JAMA) launched a comprehensive study of the market in 2006. It found a widening wealth gap, demographic changes—fewer households with children, a growing urban population—and general lack of interest in cars led Japanese to hold their vehicles longer, replace their cars with smaller ones or give up car ownership altogether. “Japan’s automobile society stands at a crossroads,” says Ryuichi Kitamura, a transport expert and professor at Kyoto University. JAMA predicts a further sales decline of 1.2 per cent in 2008. Japan’s urban population has grown by nearly 20 per cent since 1990 and most city dwellers use mass transit on a daily basis, making it less essential to own a car. Experts say Europe, where the car market is also quite mature, may be in for a similar shift. But in Japan, the “demotorization” process is also driven by cost factors. Owning and driving a car can cost up to $500 per month in Japan, including parking fees, car insurance, toll roads and various taxes. Taxes on a $17,000 car in Japan are 4.1 times higher than in the United States, 1.7 times higher than in Germany and 1.25 times higher than in the U.K., according to JAMA. While surging exports, particularly to emerging markets, have more than offset the decline in domestic sales so far, companies are looking for ways to turn the tide. Nissan, for example, is trying to appeal to the digital generation with promotional blogs and even a videogame. Toyota Motors has opened an auto mall as part of a suburban shopping complex near Tokyo. It’s a bit akin to the Apple strategy of moving electronics out of the soulless superstore, and into more appealing and well-trafficked retail spaces. It worked for Apple, but then Apple is so 21st century. Not in top gear• India sold 1,13,899 cars in January 2008, up from 1,04,501 in the same month a year ago. Though the numbers are up, the growth rate has slowed from last year’s 24 per cent to 9 per cent this year. But these are early days—the Nano, the one that’s generating the most buzz—hasn’t hit the road yet.• According to some estimates, US car sales will dip below 16 million units this year. New car sales will fall by 2.5 per cent from 16.1 m in 2007 to 15.7 m this year. It’s the economy, again.• But China isn’t slowing down. Auto sales in China are expected to cross 10 million vehicles in 2008, according to Cai Weici, vice chairman of China Machinery Industry Federation. In 2007, according to official figures, China had 8.8 million automobiles, higher by 22.02 per cent than in the previous year.Small is big?By 2012, forecasters expect consumers around the world to buy a record 38 million small cars annually, up 65 per cent from a decade earlier, says Newsweek. In Western Europe, the market for microcars is projected to rise nearly 50 per cent by 2011 from 2004 levels. In the United States, sales of small cars are expected to grow 25 per cent by 2012 to a record 3.4 million, while SUVs and pickup trucks continue to tank. But it’s India’s Nano that everyone’s talking about. Before it even goes on sale later this year, the Nano is changing the rules of the road for the auto industry and society itself
