Motorbike Sales Could Benefit From Consumption Tax Hike
BMI View : In our view, the exodus in Japanese motorbike production capacity out of the country is likely to continue as the cost of production remains high and domestic demand remains weak. However, motorbike sales could see some respite in the coming years due to the substitution effect from the hike in the nation's consumption tax.
According to the Japan Automobile Manufacturers Association (JAMA), motorbike production for the first 11 months of 2013 (latest data available) declined 7.8% year-on-year (y-o-y), to 505,160 units. This comes as no surprise to us as domestic motorbike manufacturing has been in decline for over a decade. We remain bearish on production and estimate output contracted 6.0% in 2013, to 560,000 units.
As the accompanying chart illustrates, barring the mild growth in motorbike production registered in 2005 and 2010, growth has been in negative territory since 2000. Although Japan has been a net exporter of motorbikes, the expanding footprint of domestic manufacturers into overseas markets has made it more crucial for these firms to produce closer to their target markets in order to keep costs low. As production costs remain high in the country, the need to provide affordable two-wheelers to emerging market consumers has been behind the exodus in domestic manufacturing over the past decade.
|Exodus Of Manufacturing|
|Japan - Domestic Motorbike Production, CBUs (LHS); % Growth (RHS)|