Automotive Aftermarket in Japan: Key Research Findings 2019
Used Car/Auto Repair Equipment/Repair Business show Slight Increase: Invigorated by Sharing Economy, Growth Accelerated in the Rental Market
Yano Research Institute (the President, Takashi Mizukoshi) has conducted a survey on the Automotive Aftermarket, and has found out the market trends by product segments, the trends of market players, and the future perspective.
The size of the Automotive Aftermarket in 2018 is estimated to attain 19,649 billion yen. In the new cars market, the starting point of the automotive distribution, the demand continued to remain at a high level mainly on the mini vehicles. *1 With the hybrid electric vehicles (HEV) and new vehicles loaded with technologies such as the Advanced Emergency Braking System, the enhanced product portfolio boosted the demand for replacement, resulting in 5.27 million cars sold in 2018. *1 (*1 Source: Japan Automobile Dealers Association and Japan Mini Vehicles Association)
With the strong sales in the new car market and the trend of long-term use of each vehicle, the total number of four-wheeled vehicles owned reached a record of 78.27 million cars. *2 However, the total number of vehicles owned is forecasted to start decreasing soon, against the backdrop of the aging in the middle-aged generation who had been the main customer base, the decrease in the population of young generation who was expected to lead the demand of car sales, and the lifestyle among young people that finds less value in the ownership of goods. (*2 Source: Ministry of Land, Infrastructure, Transport and Tourism)
Confronting decrease in the total number of vehicles, automotive distributers and related business players are focusing mainly on two business strategies to strengthen their business. One is to improve customer loyalty for increasing the sales per customer. This can be done by keeping in touch with customers by means of offering the car lease or auto loan with prearranged trade-in price in the sales division, while at the same time expanding total sales in the service division by providing the packaged maintenance service, which includes periodic checkups and vehicle inspection. The other strategy is business diversification. As it is becoming increasingly difficult to maintain the current business size solely by the mainstream business, more business players are launching new business to complement the sales in the mainstream business. In recent years, as the car rental market continues growing spurred by the sharing economy, the market players in car sales, auto-accessory sales, auto care services, and gas sales are expanding into the rental business, one after another.
Export of the Used Cars reached a Record Sale of 1.327 million cars
Since the brand value is well corroborated with the product quality assured by Japanese automotive manufacturers, and the good state of each cars maintained by the system such as periodic vehicle inspection, worldwide demand for the Japanese used cars is high. The statistics by the Ministry of Finance shows that the number of Japanese cars exported in 2018 reached 1.327 million units.
A growing trend is the emerging markets, such as countries in Africa (e.g. South Africa, Kenya, Tanzania, etc.), dominating the top 10 export destinations. Driven by price hikes of crude oil and raw materials, demand in the resource-rich countries continued to grow especially in 2018. The main procurement route for the exported vehicles is the wholesale market such as the auto-auction. In 2018, the number of cars traded in the auto auction reached 4.787 million units, led by the demand for export.*3 While the number of cars for the auctions (supply) is leveling off, the cars sold through the auctions are increasing, raising both the contract price and the rate of reaching successful contract agreement. *3 (*3 Source: Used-Car Co., Ltd.)
Under such circumstances, the number of major auto distributers starting overseas business are increasing each year, by hosting the own auction, developing the sales channels, and starting the auto care business. In addition to the two business strategies to minimize decreasing domestic distribution (customer loyalty/diversification), overseas business is crucial from the perspective of business growth. Current boom of the used car export increases the importance of developing overseas business further.
In 2019, the number of new car sales is likely to increase slightly compared to the previous year. Although the consumption tax will be raised in October 2019, as various measures, such as abolition of automobile acquisition tax and discount in automobile tax, are to be taken to minimize last-minute surge in demand followed by sudden downturn ahead of the consumption tax hike, the impact of the tax raise is assumed to have minor effect compared to the past consumption tax hike.
Since the replacement demand for new cars is the starting point of used-car distribution, the linked businesses such as used car sales, auto-accessory sales, and auto care (maintenance) is also forecasted to increase slightly in 2019. Although the number of cars in the auto auctions is expected to increase due to the increased number of used cars, as the demand for used-car export is also growing, the competition in the bid for obtaining good-quality cars will intensify more. Meanwhile, the car rental market is forecasted to keep on growing. Led by the full-scale growth in the auto-lease for individuals, growing demand in the car rental by rapidly increasing visitors from overseas, and the car sharing and subscription services once again drawing great deal of attention as the automotive makers launching the services in full-scale, the rental car business market will continue to expand as a high-growth market.
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