Japan auto sales plunge as young lose interest

TOKYO – December 30, 2008 Like many Japanese of his generation, the 28-year-old musician and part-time maintenance worker says owning a car is more trouble than it's worth, especially in a congested city where monthly parking runs as much as 30,000 yen ($330), and gas costs $3.50 a gallon (about 100 yen a liter).

That kind of thinking - which automakers here have dubbed "kuruma banare," or "demotorization" - is a U-turn from earlier generations of Japanese who viewed car ownership as a status symbol. The trend is worrying Japan's auto executives, who fear the nation's love affair with the auto may be coming to an end.

"Young people's interest is shifting from cars to communication tools like personal computers, mobile phones and services," said Yoichiro Ichimaru, who oversees domestic sales at Toyota.

The Japan Automobile Manufacturers Association predicts auto sales in Japan will fall to 4.86 million in 2009 - the first time below 5 million in more than three decades. This year, sales are projected at 5.11 million, the worst since 1980.

Vehicle sales peaked at 7.78 million vehicles in 1990 during the nation's heyday "bubble" economy. After that burst, Japan was mired in a decade-long slowdown, which squelched consumer spending and sent car sales on a decline. A surge in gas prices, which has subsided in recent weeks, also eroded sales.

"The changes in individuals' values on cars came cumulatively over time," said Nissan Chief Operating Officer Toshiyuki Shiga. "The change in young people's attitude toward cars didn't happen overnight. So we have to keep convincing them cars are great."

In an effort to do just that, Nissan Motor Co. has dealerships featuring colorful accessories for cars meant to appeal to Japanese women's alleged penchant for "cute" things, and signed major league star Ichiro for splashy TV ads for a new sporty model, among other efforts.

Toyota, the nation's biggest car maker, has hosted test-drive events, taken part in fashion shows and even developed its own suburban shopping mall that houses a dealership to reach out to buyers.

About half the autos produced in Japan are sold in Japan, while the other half are exported. But the U.S. market - where more profitable models like light trucks tend to be popular - is more lucrative.

Still, this nation's disenchantment with cars is cause for concern. Americans, after all, are expected to start buying cars again - eventually - partly because of the inadequacy of mass transit there.

It's a different story in Japan's cities where streets are clogged but trains are efficient. The domestic market also is shrinking due to a drop in population.

Makino, the young man who plays what he calls "organic folk music," is typical of the new breed who scoffs at the sportscar-idolizing culture of the older generation.

He and his friends see cars as nothing more than a tool, much like a vacuum cleaner, not a reflection of their identity, tastes or income level. Makino's father own a car, but he has never owned one. And he doesn't know a Honda Fit from a Toyota Vitz.

"I don't believe that having more things enriches you," Makino said in a recent interview at his apartment, sitting among shelves of wooden crates. "If you stay happy in your soul then you can be happy without money."

Companies like Toyota and Honda Motor Co., along with the electronics giants like Sony Corp. and Panasonic Corp., are the mainstays of the world's second-largest economy, and a hollowing out of manufacturing would be lethal.

Manufacturing makes up a fifth of Japan's economy in gross domestic product. But it makes up 90 percent of its exports, and any faltering in that sector would send debilitating ripple effects throughout Japan. And that's likely to further depress auto sales in Japan.

Unlike other industrialized nations, Japan lacks other sectors to drive its economy such as financials and services. Consumer spending makes up about 60 percent of Japan's GDP.

The damage to this nation's economy would be devastating if the auto industry fails to turn itself around because so many jobs will be affected - not only directly at the plants but related ones such as auto-parts makers, distributors and other jobs, including electronics companies that make batteries and other products for the auto industry.

Already, automakers here have shed thousands of jobs at plants, which had been producing cars for export to the U.S. and other overseas markets with a bigger thirst for autos. Toyota is projecting its first operating loss in 70 years.

Some dealers are taking extraordinary steps to attract domestic customers.

Motoharu Ishii has turned his Honda dealership into a special shop for dog-owners. Bigger dogs can't travel in Japanese trains, and so pet owners may be among the last holdouts in car ownership.

He helps them fit their vehicles with cages, offers discount coupons at dog runs, and has a fuzzy mat ready for visiting pets - in the same way some dealers prepare play areas for children.

"We want out customers to stay even a bit longer in our showroom," he said, adding that although sales haven't shot up he has managed to prevent drastic drops. "The last thing you want is a deserted showroom. If it looks busy, it makes it easier for people to drop by."

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