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Japan & Korea Sales and Production Commentary- June 2022

05 July 2022 Yoshiaki Kawano

Japan/Korea sales
May 2022: -18.2%; 0.38 million units vs. 0.46 million units
YTD 2022: -15.2%; 2.37 million units vs. 2.79 million units

  • Japanese light vehicle sales decreased 23% year on year (y/y) in May 2022. For major OEMs, product supply disruption continued in response to shortages of semiconductors and other components, including some electronic devices. This could drive the market down in the short term, in addition to the fact that market recovery might also be delayed because of the ongoing political and economic uncertainties arising from the geopolitical tension of the Russia-Ukraine crisis.
  • Most of the domestic OEMs in Japan posted a year-on-year decrease in sales, except for Mitsubishi in May. Sales at Toyota (including the Lexus brand) decreased 21.2% y/y. Sales at Honda were down 20.7% y/y and sales at Nissan decreased 9.7% y/y.
  • Despite the recovery from the COVID-19 crisis in 2020, component and semiconductor shortages caused inadequate production and hindered growth in 2021. This will likely continue for at least the first half of 2022, and the additional geopolitical crisis between Russia and Ukraine will put further downward pressure on the automotive market with a deteriorating economic environment. The Japanese market's overall domestic sales in 2021 finished at 4.36 million units, down 3.3% from the year earlier. Domestic sales will be nearly flat in 2022 at 4.36 million units at the most, with some recovery momentum expected toward the latter half of the year, although it is unlikely to fully compensate for the drops seen in 2021.
  • South Korea's total light vehicle sales declined 7.8% in May 2022, mainly because of the global semiconductor shortage and the prolonged COVID-19 pandemic, which continued to weigh down vehicle production and sales.
  • South Korea's post-consumption tax relief ended in 2020, but the government extended it until June 2021 to tentatively boost vehicle sales, and then extended it further until the end of 2021. This again would last until June 2022, which has been extended again to the end of 2022. However, the prolonged effects of the special consumption tax reduction are waning and becoming less influential on sales and development sustainability in the short term, as well as the growing negative impact from production activity and component shortages.
  • Meanwhile, component shortages and declining production activity continued to have a negative impact. South Korea's sales of new vehicles in 2021 declined 8.6% from the year earlier, to 1.70 million units. Sales in 2022 will likely decrease further by 7.6% compared with 2021, to 1.58 million units.

Japan/Korea production
May 2022: +1.1%; 0.73 million units vs 0.72 million units
YTD 2022: -10.1%; 4.29 million units vs 4.78 million units

  • In Japan, May 2022 output again dropped 8.8% year on year (y/y). In addition to the ongoing semiconductor shortages, several strict lockdown measures in major Chinese cities such as Shanghai due to the expansion of the COVID-19 Omicron variant have caused further operation cuts at Japanese plants due to parts shortages from China since late March. In June, some OEMs such as Toyota, Daihatsu, Subaru, Suzuki, and Nissan still have to halt their operations in Japan because of logistic disruptions, although plant operations in Shanghai have been gradually resumed. In May 2021, semiconductor shortages had already damaged domestic output. Therefore, May 2022 results were lower, at the same level as April 2022 results. The recovery phase gradually will likely begin from July, whereas risks of supply constraints including semiconductors can still be seen in the remainder of 2022. Many OEMs surprisingly achieved year-on-year increases in May 2022 because of lower results in May 2021 due to semiconductor shortages. Suzuki grew 0.7%, Subaru rose 26.1%, Mitsubishi swelled 30.7%, Honda strengthened 61.6%, and Nissan increased 89.4% y/y. However, all the five OEMs' results were lower than May 2019 production actuals. Meanwhile, Toyota including Daihatsu declined 26.5%, and Mazda decreased 32.7% y/y. These two OEMs may have been drastically affected by component shortages largely from mainland China in May 2022. Toyota even added more downtime in recent weeks.
  • Full-year 2022 production should modestly recover 2.9% y/y, to 7.67 million units, down by 59,000 units, or 0.8%, since last month. Because of the component shortage issues amid the Chinese zero-COVID policy, Japanese vehicle production has been hurt, again down by 19% (190,000 units) from the last forecast in the second quarter of 2022, including downgrades for April 2022 results (41,000 units). OEMs plan to execute recovery production starting third quarter 2022. However, we are monitoring the latest condition very carefully amid uncertain market conditions, such as the ongoing Russia-Ukraine crisis, inflation pressures, a falling local currency, semiconductor shortages, and China's zero-COVID policy.
  • South Korean light vehicle production increased 19.9% y/y to 0.30 million units in May 2022. Most automakers grew owing to the base effect from the plant shutdowns amid semiconductor shortages and increased production days. Hyundai including Kia was up 19.6%, GM Korea was up 23.4%, and Renault Samsung rose 58.7%. On the other hand, SsangYong decreased by 10.4%.
  • Although year-to-date production continued to decline to 1.44 million units, the rate of the decline narrowed to 2.3% y/y, thanks to the double-digit growth in May. Full-year 2022 production in South Korea should increase 2.2% to 3.50 million units from last year mainly because the operational capacity for semiconductors has made some progress. Meanwhile, the truckers strike from 8 to 14 June in South Korea was another hit to its production recovery. Whether the production loss can be compensated throughout the year will be highly dependent on the chip supply progress.

Posted 05 July 2022 by Yoshiaki Kawano, Manager, Japan and Korea Vehicle Sales Forecasts, Automotive, S&P Global Mobility

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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