Japan can trace its history as a vehicle producing nation back to the early part of the 20th Century. Subsequent development involved co-operative ventures with European and American manufacturers. By the early 1930s the US ‘Big Three’ had all established successful manufacturing plants in the country, but the 1936 Automobile Manufacturing Industries Act, a protectionist measure designed to promote Japanese manufacturers, effectively ended pre-War involvement from overseas. It wasn’t until the 1960s that Japanese motor manufacturing began to make progress towards the global industry that we know today.

It took 76 years and 11 months, but in July, Toyota built its 200 millionth vehicle since the first Model G1 truck rolled off the production lines at the Toyoda Automatic Loom Works in 1935. The company has had a see-saw ride in the past few years, thanks to large-scale global recalls in 2009/10 for faulty brake and accelerator pedals and the disaster of the earthquake and tsunami last year. These events ensured that Toyota slipped from its slot as the best selling vehicle manufacturer worldwide, to third place behind General Motors and Volkswagen in 2011, with sales of 7.9m units.

But the first half of 2012 has seen the company bounce back strongly, regaining its top-selling status. The company has also revised its manufacturing and sales forecasts for the 2012 calendar year with a 23% hike to 8.75 million for worldwide sales. Sales in Japan are forecast to rise by 39% to 1.67m, while global production is tipped for a 28% upward revision to 8.87m units.

This is good news overall for the mighty Japanese motor industry. The joint effects of the earthquake and tsunami last year saw Japanese motor production fall for the first time in 2 years, down to 8.4m, with passenger cars responsible for 7.16m – 85.2% of production, compared with 9.63m in 2010, according to the International Motor Vehicle Manufacturers Association, OICA. In total, including trucks and buses, 2011 Japanese vehicle production was valued at 14.6bn Yen by the Ministry of Economy Trade and Industry. The 2011 figure placed Japan as the third largest motor manufacturing country in 2011, behind China and the USA, down from second behind China in 2010.

According to data from the Japanese Automobile Manufacturers Association (JAMA), motor vehicle exports reached 4,464,413 in 2011. Of these, 3,929,904 (88%) were passenger cars. For the first half of 2012, exports have risen considerably, totalling 2,487,975 units compared with 1,840,164 in the same period in 2011, an increase of 35.1%.

In addition to exports, Japanese motor manufacturers produced a further 13,382,390 vehicles in overseas production plants around the world. Despite the earthquake and tsunami, this figure represented a small increase over total 2010 overseas production. In total, Japanese vehicle manufacturers have a total of 169 plants for vehicle and part production worldwide, including subsidiary and joint venture sites. The majority, 97 in all, are based in Asia, including 25 in China. Europe and North America are home to 19 sites each and there are a further 16 in Africa.

JAMA data for the first six months of 2012 shows that Toyota is the largest passenger car manufacturer by a considerable margin, a position it has occupied for some years. In addition, both Daihatsu and Hino are Toyota subsidiaries, Hino as the company’s commercial vehicle division and Daihatsu mainly as a manufacturer of smaller cars. After Toyota, Japan’s remaining ‘Top 5’ manufacturers are Honda, Nissan, Suzuki and Daihatsu, with Mazda close behind.

The table above reflects the speed with which the Japanese manufacturers have recovered from the difficulties of 2011. JAMA predicts that demand for vehicles in Japan will be back above the total for 2010, with a forecast for 4,291,000 passenger car sales, 21.7% up on 2011.

Vehicles in Japan are classified by both vehicle and engine size for registration purposes and by weight for licensing. Consequently passenger cars are classified as Mini, Small or Standard for registration purposes. Not surprisingly, Mini cars are the smallest with engines up to 660cc, larger models have engines between 660cc and 2,000cc excluding diesel engines and are classified as Small, while Standard cars are those with engines of 2,000cc and above, again excluding diesels.

Vehicle Taxation

Like other countries, Japan levies a range of taxes on vehicles and fuels at both local and national level. The major taxes are an acquisition tax, levied on both new and used vehicles, based on the purchase price. A second tax, the consumption tax is also based on purchase price, while a tonnage tax is based on the weight of the vehicle and assessed at each vehicle inspection. Last but not least there is an annual tax for owners, based on the engine size of the vehicle.

The Japanese government is using its vehicle tax system to encourage the take-up of low emission vehicles. Writing in News from JAMA in August, Japan-based motoring journalist Peter Nunn explained that the Government is following up tax reductions and exemptions that were introduced in 2009 with a fresh set of incentives. The starting point is a fuel consumption standard for 2015 equating to 5.4l/100km. If met, this target would represent a reduction of 23.5%, compared with the actual average fuel consumption for passenger cars in 2004.

“At the top of the incentives tree”, writes Nunn, “Electric (including fuel cell), plug-in hybrid, clean diesel and natural gas vehicles are completely exempt from the acquisition tax (paid once, upon vehicle purchase) and the tonnage tax (with the exemption applied at the time of first mandatory vehicle inspection, and a 50% reduction on the tax applied at the second inspection).  Exactly the same benefits are granted to petrol cars, including hybrids, performing 20% better than the 2015 fuel efficiency standard and whose tailpipe emissions are 75% down from 2005 standards.  For petrol cars (with the aforementioned emissions performance) that surpass the 2015 standard by taxes, and for those that meet the standard, both taxes are reduced by 50%.”

To illustrate the scheme, Nunn gives some specific examples of vehicles that are exempt. These include the 1.5-litre compact Toyota Aqua hybrid (fuel consumption between 2.82 – 3.03l/100km), the Mazda CX-5 clean diesel (5.38l/100km) and BMW X5 clean diesel (9.1l/100km). Those qualifying for the 75% reduction include the petrol-powered Suzuki Swift XG with automatic engine stop and start (4.59l/100km) and 1.2-litre petrol-powered Golf TSI Trendline Bluemotion Technology (5.26l/100km).

The acquisition tax scheme is effective from now until 31 March 2015, while the tonnage tax scheme is effective from now until 30 April 2015.There are purchasing subsidies for cars that meet the fuel efficiency requirements too. These came into effect from 2 April this year and according to Nunn, they can be applied retrospectively to qualifying vehicles registered between 20 December 2011 and 31 January 2013. The subsidies vary, but for most passenger cars, the amount has been fixed at 100,000 Yen, approximately €1,000.

Heavy Duty trucks and buses are eligible for a similar scheme of tax exemptions and reductions. So electric vehicles, including fuel-cell powered vehicles, plug in hybrid and natural gas vehicles are eligible for exemption from the acquisition tax, worth 360,000 Yen, approximately €3,700, while exemption from the tonnage tax at first exemption is worth some 37,500 Yen, approximately €390, with a 50% reduction at the second inspection. 

Diesel powered vehicles can gain an identical exemption if they can better the 2015 fuel consumption standard by at least 10%, with a 10% reduction compared with the 2009 oxides of nitrogen (NOx) and particulate matter (PM) standards. 75% and 50% tax reductions are also available for vehicles which offer lower improvements. The fuel consumption target for heavy duty trucks is the equivalent of 14.1l/100km, a 12.2% gain over the actual 2004 average.