Has demotorization begun?

The land that gave the world some of the best value-for-money cars till date is now turning its back on the four-wheeled marvel.

Japan, a nation that is home to some of the finest automobiles giants like Toyota and Honda, is currently on the brink of demotorization. The term ‘demotorization’ simply means ‘giving up on cars’ and instead moving to other means of transport.

According to various sources, today’s youth, which forms more than 40% of Japan’s population, are shifting focus towards spending their dough on the latest mobile phone, gaming device or a personal computer than saving up for a car. The Statistics Bureau of Japan claims that the average Japanese household income is approximately Rs. 1.7 lakhs out of which Rs. 24,000 are spent on consumer electronics every month. In spite of various features that an automobile offers, the youth considers a car to be nothing more than a ‘gadget’ from the 20th centaury, and by today’s standards, something that is obsolete.

Further, the Japanese demography shows that the urban population has grown by up to 20% in that last two decades. A vast number of these inhabitants prefer to use the mass transit options like the Japanese Railway for their daily travel instead of investing in a car. It is justified. According to Newsweek, owning and using a car in Japan on a daily basis can cost up to $500 (Rs. 20,000 approx.) per month. This includes the parking fees, vehicle insurance, fuel costs, tolls and other taxes. The subway network however, which is known to be one of the best in world, costs the residents as low as 300 Yen (Rs. 125 approx) a day, sans the hassle of traffic jams, parking space etc.

The country also happens to be the second largest automobile market in world by contributing to 18% of the global sales. But since 1990, the new-car market in Japan has dropped by over 33%. Though the country still holds some value for mini cars and high-end luxury brands, the decline primarily comes in the form of family cars, saloons and hatchbacks. Last fiscal, the sales dropped by 7.6% for the mid-size cars with an overall drop of 6.7% in the Japanese market. Analysts Standard and Poor predict a sharp drop this fiscal in U.S, Europe and Japan. They believe that declining sales in U.S and Europe would be primarily because tax hikes and rising fuel costs. Japan though is a more serious threat to automobile manufacturers as the decline comes due to lack of demand. Though not as drastic as Japan, analysts believe that Europe with its strengthening public transport may be next in line to embrace demotorization.

Japanese manufacturers have been able to counterbalance this decline to an extent with the rising exports (up by 8.1% in the 2007-fiscal) to the developing BRIC (Brazil, Russia, India and China) markets. The rented car industry in Japan on the other hand is growing in yearly revenues with a 30% gain in the last decade - but that hasn’t helped the domestic sales in any way. The Japanese don’t aspire for the automobile lifestyle anymore and hence the ‘car’ has lost the charm of being a status symbol. Car-makers are hence striving hard to find alternative methods to market their ‘wares’ in Japan – from sponsoring Playstation titles to buying big spaces in mega-malls. But at the end of the day, the Japanese automobile market is getting harder to resurrect.