NEW YORK/FRANKFURT/TOKYO — Auto sales have returned to growth in China and begun to show signs of improvement in the U.S. and Europe as coronavirus lockdowns ease, but the effects of a consumption tax hike still have Japan going in the wrong direction.
China, the first country hit by the outbreak, has been quick to recover. Sales there are now back to pre-coronavirus levels of growth.
With an impact on industrial output and jobs, auto sales are an economic vital sign that provides clues to whether the broader recovery from the pandemic will be V-shaped or longer and shallower.
New-auto sales in China — the world’s largest market — rose 11.7% on the year in May to around 2.14 million vehicles, according to the China Association of Automobile Manufacturers, marking a second straight month of growth.
Government subsidies have stimulated demand among consumers who had been unable to buy new vehicles owing to the economic hit from the pandemic.
Falling demand looks to have bottomed out in the U.S. and Europe. American new-auto sales slid 30.1% for May to 1.11 million vehicles, a smaller decline than April’s 46.6% and the first tally above 1 million in three months, data from market research firm MarkLines shows.
General Motors is among the automakers seeing improvement as dealerships start to reopen, particularly in the suburbs. Sales began picking up in late April, an executive at a GM dealership in New Jersey said.
Reopenings have also boosted sales in Germany, which saw a 49.5% drop for May, compared with 61.1% for April. U.K. sales, which crashed 97.3% for April, improved slightly to an 89% drop for May but still have a long way to go.
Meanwhile, the Japanese market worsened in May. Sales sank 44.9% to 218,285 vehicles, compared with a 28.6% decline for April, according to data from the Japan Automobile Dealers Association and the Japan Light Motor Vehicle and Motorcycle Association.
This stems from three main factors, including last October’s consumption tax increase. Sales jumped 12.9% by volume for September as consumers rushed to make big purchases before the hike, then sank in October and have remained down on the year since.
“There wasn’t as much of a fiscal year-end upswing in February and March as usual,” said a representative from a dealership on the island of Kyushu, who cited a drop-off from the pre-hike rush as a possible reason.
Another issue is timing. The government’s state of emergency and stay-at-home requests overlapped with the spring Golden Week holiday in late April to early May.
“Restrictions on going out weren’t as strict as in other countries, but a lot of business is usually concentrated during the holiday, so the impact was significant,” said Hiroto Suzuki, a partner at consultancy Arthur D. Little Japan.
Consumer sentiment is likely playing a role as well. Expectations of an economic downturn have dulled shoppers’ appetite for big-ticket purchases.
Customers are starting to return, but “many are hesitating to buy because they’re worried about whether they’ll get their summer bonuses,” a representative from an Osaka dealership said.
Even before the pandemic, young, urban Japanese had been showing less interest in car ownership than older generations had. While economic activity has been recovering since the government lifted its emergency declaration in May, the outlook for new-vehicle sales remains hazy.
If consumer sentiment does not improve, “we might not get on track toward recovery until September or later,” a representative at another dealership said.