Let's
talk about cars as affected by international currency war. We begin with more Japanese tales of woe involving the mighty yen among other things before shifting focus to more dynamic manufacturers in South Korea and, perhaps surprisingly, India. It may be true that Japanese carmakers have become less sensitive to the strength of the Japanese yen by locating more production abroad, but its home market is still quite important. And, with Japan entering its third decade of moribund economic growth, the current prognosis for local demand looks bleak. A
mighty yen is sure to eat into sales figures as well after conversion. In particular, the recent withdrawal of government subsidies for retiring older models reveals that they might have stolen from future sales:
New vehicle sales in Japan tanked 23.2 percent in October, the first full month after government subsidies to replace cars older than 13 years expired, industry data showed. Excluding 660cc minivehicles, sales in Japan slid 26.7 percent, the lowest on record for the month of October, an official at the Japan Automobile Dealers Association (JADA) said. It was also the first time that sales fell short of 200,000 vehicles in October in 42 years.
"We have no way of telling how weak demand will be in coming months," said Michiro Saito, a manager at JADA. But he added: "Many dealers were fearing bigger falls of 30-40 percent, so in that sense we're a bit relieved." There was one fewer selling day in October compared with a year earlier. Among the worst hit were brands with a relatively high ratio of models eligible for the government subsidies, Saito said.
Nissan Motor Co's sales, excluding 660cc microcars, dropped 30.6 percent, Honda Motor Co's fell 29.9 percent, while Mazda Motor Co's sank 52.5 percent. Leader Toyota Motor Corp, whose hybrid models still enjoy exemptions on some taxes under a separate government incentive scheme, saw a comparatively tame fall of 24.7 percent, including its high-end Lexus brand.
However, the picture is not as bleak across the Asia-Pacific. South Korean carmakers appear to be doing quite well not just locally but globally as the balance of automotive power (OK, so I made that up since it sounds cool) shifts. There's also the matter of a Korean won that's relatively less mighty than the yen that's helping price competitiveness:
South Korean companies are expected to continue to outperform the global market in a weak recovery, driven by new model launches. Although the Korean won is firming, the Japanese yen, which hit a 15-year high against the dollar on Monday, remains far stronger, hurting the price competitiveness of Japanese vehicles sold overseas. Growing optimism for Korean car makers sent their shares surging on Monday, with Hyundai Motor shares jumping 6.2 percent and Kia Motors shares up 10.2 percent up in a broader market up 1.7 percent.
"Things cannot be better for Korean automakers," said Michael Sohn, an analyst at Macquarie Securities...Korean automakers are expected to log higher profits than Japanese peers this year, but their valuations are cheaper than Japanese makers. I expect rallies of Korean automakers to continue for the time being," Sohn said.
While demand for cars in developed markets [like Japan] is stuck in low gear on anaemic economic recovery and the end of government subsidies, global automakers have been increasing their focus on emerging economies such as China, now the world's largest auto market, and India.
Hyundai Motor, South Korea's top automaker, saw its sales rise 10.4 percent at home and abroad in October from a year earlier, while second-ranked Kia Motors saw its total sales jump 29 percent. The latest figures marked record highs and reinforced the bullish outlook for South Korean carmakers, which are expected to post strong earnings in the current quarter after reporting forecast-beating profits for the third quarter last week.
And let's hear it for Indian manufacturing! Long derided as a laggard compared to India's dynamic services sector, it is actually making it big:
Indian carmakers maintained double-digit sales growth in October on robust demand in one of the world's fastest-growing markets as a rapidly expanding economy, expected to grow over 8 percent this fiscal year, boosts incomes and consumer spending. India's top car maker Maruti Suzuki reported a 39 jump in October auto sales from a year earlier, while Tata Motors posted a 21 percent rise in sales. Mahindra & Mahindra's vehicle sales for the month rose 34 percent.
India's automobile industry is likely to grow by 18-20 percent in the fiscal year that ends in March, according to the sector body, Society of Indian Automobile Manufacturers (SIAM). Demand in India usually rises during the festive season that starts in September and peaks in November after Diwali, the Hindu festival of lights, when most employees get their annual bonuses.
It wasn't too long ago in 1997 that Kia
declared bankruptcy amid the Asian financial crisis, but look at it now. The world has moved on and Japanese carmakers should have ample cause for alarm.
Let's talk about cars as affected by international currency war. We begin with more Japanese tales of woe involving the mighty yen among other things before shifting focus to more dynamic manufacturers in South Korea and, perhaps surprisingly, India. It may be true that Japanese carmakers have become less sensitive to the strength of the Japanese yen by locating more production abroad, but its home market is still quite important. And, with Japan entering its third decade of moribund economic growth, the current prognosis for local demand looks bleak. A mighty yen is sure to eat into sales figures as well after conversion. In particular, the recent withdrawal of government subsidies for retiring older models reveals that they might have stolen from future sales: