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Automobiles

Tax hike sends Japan auto sales into first decline in 3 years

Car-sharing and uninterested millennials dim long-term outlook

A Toyota dealership in Odawara, southwest of Tokyo: Automakers are taking new approaches to sales in hopes of invigorating a sluggish market. (Photo by Yoichi Iwata)

TOKYO -- Japanese sales of new automobiles likely shrank for the first time in three years in 2019 after an autumn tax increase led to a drop-off in demand.

About 5.2 million vehicles were purchased through Thursday, based on automaker and other data, undershooting the 5.27 million bought in 2018.

Vehicle tax breaks were not enough to prevent an immediate downturn after the consumption tax rose to 10% from 8% on Oct. 1. 

Sales sank 25% on the year in October and 13% in November. December's are expected to underperform as well.

No recovery is anticipated in 2020. The Japan Automobile Tyre Manufacturers Association sees sales slightly exceeding 5.1 million vehicles, down from the nearly 5.2 million of 2019.

New versions of mainstay models such as Honda Motor's Fit and Toyota Motor's Yaris are due out next year, but a weak environment for consumer spending and other factors are expected to continue to depress demand, according to the trade association.

Japan's automakers are seeing the domestic market transformed by such trends as vehicle-sharing and the fading allure of cars for young people.

Car-sharing services had 1.62 million registered users in 2019, or 3.5 times the 2014 tally, according to the Tokyo-based Foundation for Promoting Personal Mobility and Ecological Transportation.

Prospects are similarly grim further down the road. Demand for new vehicles will plunge more than 30% from fiscal 2018 to 3.47 million units in fiscal 2040, according to the Japan Automobile Dealers Association.

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