Toyota, Honda sales may drop after incentives end

Kenichi Ishida saw monthly sales at his Toyota dealership surge by up to 50 percent under the Japanese government's stimulus plans to boost car demand. Now he frets that famine will follow feast.

"I'm so afraid for next year," Ishida, 47, said in his showroom in Tokyo's Setagaya ward. "Our sales will plunge. I know it's coming."

As government incentive programs end in Japan, Europe and the U.S., automakers and dealers say they may have to continue the discounts or face a return to declining sales. Either scenario may add to losses for carmakers including Toyota Motor Corp., the world's biggest.

"We are very worried about the backslide after the programs end," said Kiyoshi Ozaki, chief financial officer at Hiroshima-based Mazda Motor Corp. "We fear we may be forced to give incentives, in the place of the governments."

Japan's 370 billion yen ($4 billion) program, which offers rebates of as much as 250,000 yen for people who trade in older cars for newer, more fuel-efficient models, is scheduled to end in March. Cars registered since April 10 are eligible for the program. The initiative and new tax cuts for fuel-efficient cars may generate 1 million sales in the fiscal year ending March 31, according to the Japan Automobile Manufacturers Association.

In Europe, Ford Motor Co. is lobbying governments to extend incentive programs, including Germany's 5 billion euro ($7.1 billion) plan, which ran out of money Sept. 2. The $2.88 billion U.S. "cash for clunkers" plan, which generated almost 700,000 new car sales, expired Aug. 24.

Sales Rise

The stimulus policies spurred car sales that were set to fall to the lowest in about three decades in Japan and the U.S. Japan's car sales rose 2.3 percent last month from a year earlier, the first gain in 13 months, while U.S. demand grew 1 percent, the first monthly increase since October 2007. European car sales rose 2.4 percent in June, the first gain in 14 months.