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“Demotorization” in Japan Prompting Assessment of Impact on Economy and Re-Evaluation of Business Plans

Japan has become the first major developed country where automobile ownership is shrinking. The most recent survey by the Ministry of Land, Infrastructure, Transport and Tourism showed that the number of automobiles owned, including minicars and motorcycles, totaled 79.08 million units at the end of March 2008. This is a decrease of 0.2% from a year earlier and marks the fourth straight month of decline.

Demotor
New car sales and ownership in Japan. Click to enlarge. Source: Nikkei

A story in the Nikkei assess the impact of “demotorization” on business and the economy.

Recently, executives of the Japan Automobile Dealers Association were disheartened by a forecast of future car sales made by the association staff that will be included in its Dealer Vision outlook to be publicized in early August. The forecast puts sales in 2020 of cars with engines of over 660cc at less than 3 million vehicles, a steep plunge from 3.43 million in 2007.

The forecast poses a threat to the Japanese economy, which has heavily relied on motorization for growth. Sectors directly associated with automobiles alone, such as automakers, used car dealers, car accessory makers and marketers, and fuel suppliers, produce 40 trillion yen [US$373 billion] in annual sales, and the central and regional governments invest a combined 7.8 trillion yen [US$72 billion] a year to construct and repair roads.

...As Japan becomes increasingly demotorized, companies will need to seek out new business opportunities that arise as a new social infrastructure is built.

The Nikkei notes that the decline in car ownership is prompting a wide range of sectors including retail, restaurant, construction and real estate to re-examine their business models.

In late May, the Japan Federation of Construction Contractors recommended that construction companies promote urban developments with public transportation systems serving as the means of travel.

Comments

HarveyD

Could it be that many Japanese are waiting for electrified PHEVs and BEVs before buying a new vehicle?

Many people are effectively delaying the purchase of a new vehicle in anticipation of better Hybrids, PHEVs and BEVs by 2010+.

ICE usage (Km per day) will certainly go down as the price of fuel goes up from $4 to $8+ a gallon. People will use public transports and shared vehicles more often.

Oil at $150 or $200 a barrel will accellerate the momentum and further reductions in ICE usage will come.

Interesting days ahead.

Treehugger

Harvey

Your are too much of an all-electric-centric, I think that's waht happening in Japan has nothing to do with peoples waiting for electric car.

- population is ageing and shrinking
- Have you ever tried to drive in japan ? you have to be higly motivated
- price of gaz is to expensive and they have mass public transportation

Herm

Interesting days ahead as the transportation system transitions to electrics.. what will happen to all the mom&pop gas stations on every corner, the garages, brake and muffler shops and so on?

What maintenance will an electric car require, tires and new windshield wipers once in a while?.. maybe a wheel alignment every 50,000 miles. Except for the batteries, electric cars should also age very well.

sulleny

"Demotorization??" Typical gloom spin utterly avoiding the real reason for the stat:

"Japan's birth rate fell below the replacement rate of 2.1 in the early 1970s. It slid to a low of 1.26 in 2005"

http://www.economist.com/world/displaystory.cfm?story_id=9539825

Someone's got a nice job making this stuff up. Livin' off the govm't teat.

Treehugger

Hem

You are right, an electric economy would destroy huge amount of jobs in the auto industry, but think of all the jobs that the new energy will create to build an maintain 1 millions wind mill, 1 milliom wave powrered generator, install, 50 millions of solar panel, reinforce insulation of 100 millions house, developp a new network of rail transportation, replace 100 millions NG heater by heat pumps, devlopp an industry of 100% recylcling and repair rather than dump and disposable,

personally I think the only way to compensate the economic decline in the years to come due to soaring cost of fossil energy is to massively invest in the green and renewable stuff.

aym

It is easy try to blame this on the aging population but that isn't the case. In an earlier article posted on GCC, the fact is that people are just not willing to buy cars especially larger cars in Japan. This has scewed predictions and plans to road infrastructure which would have easily included aging population into its figures. The demographics of what the younger people are buying show this change.

As for the impacts of demotorization. It is an opportunity to shift away from automobiles to a more sustainable economy especially since it is a known trend in it's own domestic market. Hopefully they will not go down the short and easy road.

arnold

With a population of 127M relatively small land area, highly centralised and industrialised, one would expect to see EV, Hydrogen and other clean air technologies appear here first.
A very reasuring developent.

sulleny

No, actually it is the shrinking population in Japan causing the downturn. Agenda-based thinking does not change the facts. Less people, less car sales. Not rocket science.

stas peterson


Gee Whiz,

Auto registrations have declined for not 1, not 2, not 3, but four, (4), FOUR WHOLE MONTHS. The world is changing, per the social prophets.

Nothing like making a mountain out of a molehill...

critta

Could you give us some evidence sulleny? How do you know that other factors such as excellent public transport are not playing a part?

aym

According to the other GCC post, looking at just the demographics, it showed a drop in car ownership as well as a shift in vehicle type.

The number of vehicles owned as of Feb. 29 fell in 30 prefectures, such as Tokyo, Osaka and Kyoto, while rising in 17 prefectures, including Aichi, Saitama and Chiba. The steepest fall, 1.7%, occurred for vehicles with engines of more than 660 cc, which include cargo and passenger vehicles. Minicar ownership, however, rose 2.8%. New-vehicle sales peaked at 7.77 million units in 1990, and 2007 sales were 30% off that record.

While the downtrend may be good news for the environment because it will help reduce carbon dioxide emissions, the nation’s road-building policy may need to be revamped. The current plan to spend 59 trillion yen over 10 years is based on the assumption that vehicle traffic volume will peak in 2020.

There is no talk about increasing death rates or such. The fact that their own statisticians expected auto volume to peak in 2020 shows a shift in the market attitudes towards car ownership more than the more easily modeled aging population, its consequences and the aging pop's mobility needs.

There are no stories for instance in auto ownership going down in Germany (at least in relation to an aging population) even though it has experienced basically zero to negative population growth for years (-0.12% in 2007), just like Japan (-0.088% in 2007).

The only agenda is not jumping to conclusions not evidenced in the story which has no mention of aging populations and the definite mention of road planning/spending based on the static belief that the population would own vehicles in the same proportion that they had in the past and drive them the same way. This would have led to a volume peak in 2020. Whether of course this is a long term trend envinced in changing consumer behaviour or a blip caused by gas pricing is unknown. It's probably a little of both.

People are trying to move towards more fuel efficient vehicles in today's gas price climate and thanks to forward thinking infrastructure spending by the Japanese, can lose auto ownership entirely in certain circumstances.

In this story, one can sort of make a case towards a feedback effect of high gas prices on the overall Japanese economy. Maybe, but even that is a stretch since the only correlation is the favouring of smaller engine sizes and all the other evidence would have to be external. The only things the story really correlelates, is that domestic ownership is deceasing and the negative impacts on the domestic Japanese economy it may have. And it's a may since car exports may compensate to a degree for supply chain production. This won't effect Japanese user side economics though like road expeditures. And it may free up capacity to shift the economy in a more sustainable and profitable direction. Which is what is hoped for if this is a long term trend.

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