Following is a speech by EURU Chairman at a press meeting held on January 15 (Wed), 2014.
Mr. Kintaro Ueno
Against the background of the aggressive economic policies of Prime Minister Abe, represented by the “three arrows”, last year, the country’s economy returned on the way to recovery at moderate pace after long years of deflation. The automobile industry as a whole is also regaining dynamism gradually, and with the 43rd Tokyo Motor Show held in the fall attracting more visitors than the previous show, we now realize that cars are grabbing people’s attention again.
On the other hand, however, there are so many people who are still forced to live in the evacuation shelters due to the Great East Japan Earthquake and the associated accident at the nuclear power plant. Moreover, last year saw so many disasters caused by typhoons and severe rain storms. I would like to express my heartfelt sympathy, here again, for those who suffered and I am crossing my fingers that they will be able to recover their life as usual as quickly as possible.
Results of 2013
Looking at Japan’s domestic automobile market of last year, sales of registered vehicles were down 3.8 percent from the previous year and Kei cars up 6.7 percent, resulting in the entire market almost remaining flat at 0.1 percent; however, as mentioned earlier, the market was headed for recovery in the second half of the year with the sales improving progressively.
Under such circumstances, sales of foreign-brand imported vehicles were up 16.1 percent from the previous year to 280,500 units, which was a great result exceeding the initial forecast by far.
Thanks to the efforts of our member companies to address the Eco-car Tax Incentives of Japan, last year, about 67 percent, or two in every three vehicles, were eligible for the eco incentives. In particular, we are convinced that, by combining superior environmental performance with powerful driving performance in downsized package, those vehicles that are manufactured in such a way that “fun of driving” is not sacrificed have constantly won the support of the customers. Furthermore, we feel proud that such results have been produced by the successive introductions of technologies of those countries with long history of car manufacturing, and unique and attractive models, including those models featured with Autonomous Emergency Brake systems, pedestrian airbags and other advanced safety technologies developed in the EU/US, and new-generation diesels engines that meet the regulations more stringent than those of other countries. In addition, the so-called ultra-luxury models costing more than 10 million yen also performed well.
As a result of the above, the share of the foreign brand vehicles to the overall registered vehicles stood at 8.6 percent for a record high. However, the shares to the entire market including Kei cars still remained low at 5.2 percent.
The total imported cars including Japanese brand vehicles were up 9.5 percent from the previous year to 346,000 units.
Last year, we had good news for the imported cars, which was our member importer winning the Japan Car of the Year award, namely Volkswagen Golf. It was the first time that the longstanding award was granted to a foreign brand vehicle, which is truly remarkable. The award is considered an indication that the various performance of non-Japanese brand imported cars are highly appreciated and well accepted by the customers in Japan.
Outlook for 2014
Partly due to the declining birthrate and aging of society, Japan’s motor vehicle market is expected to continue shrinking in the long term. In the short term, the Consumption Tax is slated to be hiked in April, causing concerns about how long consequent decline in consumption will continue. Under such environment, as it is essential to maintain customers’ buying sentiment by providing even more attractive models of cars in the market, EURU needs to focus on the activities to eliminate factors that limit buying motives.
The FY2014 Taxation Revision Outline that was revealed in the end of last year contains a decision to lower rates of the Automobile Acquisition Tax as of the Consumption Tax hike in April; however, the reduction is not sufficient to offset the increase in Consumption Tax and the total cost of purchasing a motor vehicle will be, unfortunately, higher. Furthermore, EURU regrets that the Outline does not provide for the abolition of the Tonnage Tax, as long requested by EURU and other automotive organizations.
EURU will continue to work closely with other automotive associations for the taxation revisions of the future to achieve fair and equal taxes and a reduced burden on users.
Meanwhile, positive signs were seen last year including upturn in private consumption stemming from the rise in stock prices; however, for this year, it is necessary to carefully judge until to the last minute demand before a further rise in the Consumption Tax rate.
When the Consumption Tax rate was hiked by 2 percent in 1997, the auto industry suffered very badly. Due to a strong last minute demand before the tax hike, and economic slowdown afterwards, the calendar year sales of foreign-brand imported cars dropped by almost seven percent from the previous year, leading to imbalanced supply and demand.
This time, the lower rates of the Acquisition Tax will likely serve as a soothing agent; however, still, the last minute demand and a backlash effect cannot be avoided. Therefore, for the outlook of the year 2014, the figures will likely be higher than a year ago until March due to the last minute demand and they will be lower than the previous year in April onward due to the backlash and the decline in private consumption stemming from the tax hike, a trend of which is projected to continue for a while.
I will refrain from stating specific numbers, but EURU’s member companies will continue to actively introduce attractive models, pursue the environmental performance and economy based on approaches that differ from those of the Japanese automakers, and upgrade their products to meet the needs of those customers seeking “specific features of imports”, in an attempt to minimize worsening of our business performance.
For that end, we have to solve several issues including, for example, the achievement of further reductions in tax burdens on vehicle owners and users, and swift and steady implementation of regulatory reforms. We will lobby the ministries concerned on behalf of the imported car industry in close coordination with other automotive organizations.
Activities of EURU
(1) Taxation Revision Request
In order to secure a market environment in which customers are able to freely choose attractive imported cars featured with innovative technologies, EURU has been calling for reductions in burdens and streamlining of the auto-related taxes over years.
Last December, the cabinet approved the FY2014 Taxation Revision Outline. Of these, the inclusion of the cut in the rate of the Acquisition Tax on private-use registered passenger cars by 2 percent across the board as of the Consumption Tax hike to 8 percent in April of this year is considered an alleviator. Also, the worst situation has been avoided, thanks to the scrap of a proposal made in the process of discussions on the taxation revision to levy heavy taxes on highly-priced cars, partly due to the objection by EURU and the automobile industry that “it would not be acceptable since it would not only be disadvantageous to highly-value-added automobiles, but also hamper the development and penetration of leading-edge technologies.
However, for the taxation revision of FY2014, reduced burdens on users, which EURU has been calling for, is not attained. In contrary purchasing cost will be increased. We are concerned that this will lead to lower demand for new vehicles in Japan from April onwards.
Furthermore, For the FY2015 Taxation Revision, direction which will be determined by the end of this year, remaining issues are piling up, including the “abolition of the Tonnage Tax”. EURU will continue making efforts while focusing on the issues of reductions in burdens on car users and streamlining the levying process.
(2) Technology and Environment-related Items
Looking back the history of imported vehicles while focusing on the aspect of safety technologies, years back, they were early adopters of such latest safety features as seatbelts, anti-lock brake systems (ABS), child restraint systems (CRS) and airbags. More recent examples include autonomous emergency brakes, pedestrian airbags and advanced adaptive cruise control systems. We believe that it is not an overstatement to say that the introductions of the world’s latest technologies by imported vehicles have been leading the market of Japan to this date.
Likewise, for the technologies in the area of the environment, imported cars are quick to introduce in the market those technologies to reduce CO2 and improve fuel economy, including, more recently, clean diesels, power trains that combine downsized gasoline engines with turbochargers, and dual clutch transmissions, making contributions of their own in the Japanese market in the area.
Now, it is needless to say that, in order to introduce the world’s latest technologies to Japan, it is a must to comply with various laws and regulations controlled not only by MLIT, but also by METI, MIC and others. However, there have been cases in which the advanced technologies to be introduced are not covered by the ongoing laws and regulations due to their innovative nature, and hence, it took sometimes very long until market introduction or even the introduction had to be given up.
In order to make sure that new technologies are introduced to the Japanese market smoothly, we at EURU actively engage with talks with the ministries concerned in support of introducing new technologies by the member importers, which will continue to be the focus of our activities in this year again.
Here, let me illustrate the examples of new technologies, on which we are having consultation with the ministries concerned, their current status and prospect.
First examples are hydrogen airbags and new MAC refrigerant. Hydrogen airbags excel at friendliness with human body and the environment. The new MAC refrigerant, with low global warming potential, is also friendly to the environment. Both of these are already introduced in the EU/US. However, under the ongoing High Pressure Safety regulations of Japan, Japan-unique regulations remained, and there has been a problem that, unless the current regulations are revised, those vehicles equipped with such environmentally-friendly technologies cannot be imported to Japan only amongst advanced nations. On this issue, EURU had consultation with METI several years and, in the end of last year, the Ministry finally presented its intention to make required revisions to the regulations, confirming progress. This year, we will continue carefully watching the regulatory revisions as soon as possible and at the latest by the end of the year, while supporting the deliberations by METI and its advisory council.
Second example is the sophisticated radar that can detect pedestrians and/or bicycles in front of a vehicle. In order to introduce the system, it is necessary to revise the laws/regulations relating to the Radio Act, controlled by MIC, and EURU is conducting lobbying activities for that purpose. Instead of seeking new frequency band, we are asking to broaden the bandwidth within the framework of the frequency bands already available so that we expect see quick achievement of deregulation that will allow the introduction of the latest technology as early as possible.
Let me go on to the development of the international whole vehicle type approval (IWVTA), promoted by the Japanese government. As I also mentioned at the (last) press conference in July last year, such system carries highly expectations in terms of facilitating introductions and penetration of new technologies for the environment and safety. We are determined to provide as much support as possible for the attainment of the system. While the first step of IWVTA is slated to start in 2016, at that point of time certain regulations will not be included. Examples include emissions/fuel efficiency standards for passenger cars.
If these regulations are harmonized on a global basis, the models to be introduced in the Japanese market can be expanded, by allowing quick introduction of latest technologies. That is where the imported cars can contribute in the areas of safety and the environment, and we have a high expectation of their quick achievement.
(3) Expectation for measures to promote safety features
Society in general has high expectations towards the improvement of Motor vehicles in both terms safety and the environment. However, looking at the current policy measures of Japan, initiatives are taken to a considerable degree that support the penetration of eco-friendly vehicles, such as the Eco-car Tax Incentives and the Clean Energy Vehicle Subsidy, while no system or incentive has been implemented for tax cuts, subsidies, auto insurance or the like that are intended to improve safety of passenger cars. For example, for safety of pedestrians, we are convinced that the introduction of tax cuts, subsidies, insurance discount or incentives on autonomous emergency brake systems could lead acceleration of penetration of the latest safety features. It should greatly contribute to the achievement of the government’s goal to cut traffic annual accident fatalities by 2,000 persons. EURU is requesting the government and other parties concerned to take new initiatives to support penetration of safety features.
(4) Two-wheeler services
This is the fifth year after EURU welcomed two-wheeler importers as its members.
The first area of focus is the promotion of the introduction of the Preferential Handling Procedures for imported cars, known as PHP certification. Of the eight members, three have already obtained certification through the PHP system on about 30 percent of the total motorcycles registered. This year, EURU will provide support in the area to many other members in an attempt to improve convenience.
The second area of focus is the activities relating to global harmonization of standards and regulations on vehicles. For the new noise regulations already, the UN R41-04 has been adopted in the Road Vehicles Act of Japan. Going forward, we will be working on the adoption in Japan of the UN regulations for two-wheeler lamps, in addition to cooperating with MLIT on the revisions to the Vehicles Act toward the introduction of the third emission regulations to be implemented in 2016.
Another area of focus is the stimulation of the motorcycle market of Japan that has been and will be on a shrinking trend in the mid to long terms. In collaboration with the Motorcycle Committee of JAMA, EURU has been taking various activities for market stimulation. Going forward, we will actively participate in the Bike Love Forum (BLF), started last year as a joint project of the government and private sector, enhancing activities toward the “achievement of domestic motorcycle demand of one million units in 2020”, a goal of BLF.
(5) Co-organizer of Tokyo Motor Show
Continued from the previous show, EURU participated in the Tokyo Motor Show 2013 held between November 22 and December 1 of last year as a co-organizer.
The number of visitors was much greater than the previous show, and we feel pride that the participation by our members played an essential part. In addition, following Tokyo, the motor shows held in Nagoya and Osaka were also concluded successfully. Furthermore, motor shows will be held in other major cities including Fukuoka, Sapporo and Sendai. We are confident that they will also successfully provide visitors with opportunities to touch and feel the appeals of imported cars.
In closing, in close coordination with JAMA, JADA and other automotive association and through collaboration with METI, MLIT and other government bodies, EURU will spare no efforts to further contribute to the growth of the imported car market and the development of society with motor vehicles that are safe and environmentally-friendly. Through the provision of attractive imported cars of various kinds to the customers, we sincerely hope to contribute to the sustained growth of the auto industry and the economy of Japan.