Jun 06 2016

Japan's used-car prices slide on weaker African demand

TOKYO -- Demand for preowned Japanese automobiles has been shrinking in African countries that export resources to China, resulting in lower vehicle prices.

This has turned the Japanese used-car industry into another unexpected casualty of the slowing Chinese economy.

"Natural-resources-exporting countries in Africa cannot buy as many Japanese used cars as before because China is not buying as much natural resources as before," said Hiroshi Sato, chairman of the Japan Used Motor Vehicle Exporters Association.

Japan's used-car exports for the January-April period fell 7% to 320,000 units, trade statistics show, the first year-on-year decline since 2009. Shipments plunged 70% to 1,600 units to copper producer Zambia, where Toyota Motor's Corolla passenger car is very popular. Mozambique, an exporter of bauxite and coal, took in 43% fewer used cars from Japan at 3,200 units.

Be Forward, a Tokyo used-car exporter whose network covers more than 120 countries, has boosted exports to the Bahamas, Fiji and other countries less prone to the commodities market slump. This has helped the company avoid falling into the red, but the export volume has still decreased because those nations have smaller markets, a company official said.

A drop in exports to Sri Lanka also hurt Japan's used-car market. Preferential tariffs on hybrid vehicles helped the South Asian country become the biggest export market for Japanese used cars in 2015 in terms of value and sixth in terms of quantity. But the government started lifting tariffs in late 2015, with the latest hike -- targeting midsize hybrids, announced Thursday.

Domestic repercussions

Some estimates suggest 40-50% of Japanese used cars are exported. Declining exports have naturally driven up supplies in the domestic market.

"As the export environment worsened in the April-May period, used-car auction prices have declined," said Sanshiro Fukao, chief researcher at the Hamagin Research Institute.

At USS, the leading Japanese used-car auction company, the average winning bid in April fell below 600,000 yen ($5,400) for the first time since March 2015. At 598,000 yen, the April price translates to a 1.7% drop from a year earlier.

Data from the Japan Used Car Dealers Association shows that the average winning bid price rose 0.2% in April to 263,000 yen, after undershooting year-earlier figures from November to March.