Japan carmakers face 20% drop in sales

Big News Network.com - Carmakers Toyota and Honda are likely to receive a big blow and see a significant drop in their sales in the fourth quarter when Japan ends its subsidy programme, analysts have predicted.

According to a Bloomberg analysis, Toyota and Honda Motor Co. have both benefitted from Japanese vehicle sales that surged 53 per cent during the first seven months of the year.

It was when the Japanese government invested $3.8 billion to subsidize its struggling automotive industry.

But now that 88 per cent of that fund has been used up, analysts are expecting a drop off in sales next quarter.

Japan vehicle sales will drop as much as 20 per cent next quarter as the payouts expire, Bloomberg quoted analysts at BNP Paribas and IHS Automotive saying.

Toyota is counting on a cheaper version of the Prius hybrid to sustain demand.

The Bloomberg said the end of state aid of as much as $1,260 per vehicle will be compounded by the government's plan to double the national consumption tax, prompting additional calls from carmakers for stimulus measures.

"The government will have to come up with ways to offset the negative impact of the consumption tax increase," said Yoshiaki Kawano, an analyst at IHS Automotive in Tokyo.

Should the subsidies end by next month, sales in the three months starting October 1 will drop as much as 20 per cent, he said.

Japan accounted for about 27 per cent of Toyota's first-half sales, according to Bloomberg and JAMA data.

That means a 20 per cent drop in demand in the home market would reduce deliveries by about 5.4 per cent.

The news agency predicted that growth in other countries, including the US, will probably enable Toyota to stay No1 in global sales, ahead of General Motors and Volkswagen.