By on August 13, 2010

Remember the huge parking lots full of unsold cars? That picture was on everybody’s mind as they analyzed new Japanese inventory reports of cars and electronics. According to The Nikkei [sub], the stuff is piling up again, fueling angst about a double dip recession.

Data released by Japan’s Ministry of Economy, Trade and Industry shows that the inventory index for consumer goods climbed 14.3 percent on the year in June. Production rose 8.1 percent. It’s the second straight month where inventory growth has outpaced production.

This is exacerbated by the fact that cars are still flying off the lots in Japan, and will likely do so through September, only to drive against the wall in October when Japan withdraws the infusion of happy-dugs call subsidies. The Nikkei says it more politely: “Automobile production is widely expected to fall off significantly.” But why do they pile up now? It’s not going so well in the U.S.A. and the climbing Yen makes exported cars more expensive (or less profitable) by the day.

“Mounting inventories pose a challenge to Nissan and other automakers,” says the Nikkei without elaborating why they singled out Nissan.

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17 Comments on “Please, Not Again...”

  • avatar

    Tsk, tsk, tsk, they never learn, do they? Same mistakes, same economics, same old…well, you get the picture.

  • avatar

    and yet VW sells 4 million… the Americans won’t make any more cars because they are too cautious… and the Koreans.. well… they’re taking up a huge share of Australian iron ore so that the world can enjoy the limited charms of Hyundai/Kias

    this business is too much for me

  • avatar

    This is not good, but a silver lining to this story. This excess capacity will push car prices down. Good for the consumer. A real problem for Detroit in that their fixed cost structure is not competitive. Also a real problem for Toyota who is watching the appreciating Yen.

    • 0 avatar

      what say you?
      I see this as an advantage for Detroit. They hardly sell anything in Japan as it is. The only companies that will be hurt by a slow down of Japanese customers are the asian car companies.
      On another note… Go YEN Go!!!!!

    • 0 avatar

      Disagree. Japan makers not hindered with UAW regulations and costs. They can initiate a price war that Detroit can only lose. Detroit missed it’s chance to bring UAW costs down. The politicans got involved, kept the cost structure high, and I fear for Detroit’s future. Detroit can not compete with aggressive and efficient foreign automakers. Nothing short of trade restrictions can save Detroit now.

    • 0 avatar

      This is about the absence of Japanese customers in Japan.
      Nothing about Detroit or American wages.
      Detroit sells very few cars in Japan so what difference does it make if Japan’s auto market went south?
      Get your head out of the sand and look around… it has NOTHING to do with UAW or Americans… This is about the Japanese auto market in JAPAN Period.

    • 0 avatar

      Many of those cars are for export. And with excess inventory comes rebates and price cuts. Imagine if Toyota and Honda starts putting thousands on the hood of their cars to move them. This puts severe pricing pressure on all sales in this country. What do you think happens to Detroit margins? In the red.

    • 0 avatar

      disagree… The cars that are for export are being sold in those markets. Its the Japanese market that isn’t selling. You keep trying to bait someone into an argument about Detroit and the UAW. Read the article before you comment instead of trolling. Enough said!

    • 0 avatar

      Yes, but if domestic demand is flagging it only makes sense that they’ll ramp up exports to make up for it, and that could lead to oversupply and price reductions in the States. Although it seems like it would make more sense to chase the expanding Chinese market, if they already have a distribution channel in place.

    • 0 avatar

      If the cars in inventory are right-hand drive – they’re for domestic consumption – ergo, not an issue for Detroit and the UAW.

      If the cars are manufactured in Japan, most of them will be for domestic consumption – ergo, not an issue for Detroit and the UAW.

    • 0 avatar

      Car prices need to be pushed down, prices in the US are already 30-50% too high as it is. No wage earner can afford a new car these days. Get the Fiesta down to $10K and we’re talking.

    • 0 avatar

      “Japan makers not hindered with UAW regulations and costs.”

      The UAW is not the problem here.

      For one, the Japanese marques are unionized in their domestic market, as well as in many nations (China) in which they operate.

      Two, the domestics, if you can call them that, can just shift out of the US or Canada.

      Globalization has more or less eliminated the UAW (or any trade union) as a force to be reckoned with in manufacturing. If a manufacturer is willing to tolerate a union, it’s because they have cost reasons that make it work.

    • 0 avatar

      Davey –

      While I wouldn’t mind seeing average car prices drop across the board (I’d like to be able to afford more car myself, and it would be a lot easier to sell more vehicles and not have to discount them as much to make a deal) it’s a bit hyperbolic to say a wage earner can’t afford a new car.

      If you mean someone making minimum wage as a sole earner, then yes, that’s strictly used car or public transport territory, but if all someone can pull is minimum wage they likely have some poor life choices to blame for that.

      Anyone in a professional or skilled labor position should be at least able to manage the equivalent of $20/hour, which even after taxes is over $2,800 take home per month, more than enough to cover the payments on a midsize sedan these days. Huge credit card debt, overambitious mortgage responsibilities and having kids too early in life can all eat into that income pretty fast, but again, that boils down to poor financial and life planning, not new cars being overpriced overall.

  • avatar

    I appreciate the yen.

  • avatar

    I thought that most “Japanese” cars for sale in the U.S. are made in the U.S. Some Acuras and Lexus are still made in Japan.

  • avatar

    I wonder about the long term prospects of Nissan and Mazda. Japan is not a growth market…

  • avatar

    Just to put things in perspective: More than half of the cars produced in Japan are for export. We have no data which ones are piling up, the ones for export or the ones for domestic consumption.

    The hunch is that it’s the ones destined for exportation, because
    – the Japanese new car market is still running at a brisk clip
    – the Yen is climbing higher and higher an turns into an export impediment.

    China just bought a big bunch of Yen, driving it up some more …

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