Market Situation in Japan Yoshihiro Yano Director General, International Department Japan Automobile Manufacturers Association, Inc. OICA Roundtable on Global Market Situation New Delhi, 22 October 2010 Thank you, I will explain the status of the vehicle market in Japan as briefly as possible.

New Motor Vehicle Sales in Japan, January 2008-September 2010 Lehman Brothers’ collapse -25％ Purchasing subsidies end On this slide we see the monthly sales trends from January 2008 to September 2010. The red line represents the combined car, truck and bus sales levels compared with same-month levels of a year before. After the collapse of Lehman Brothers in September 2008, sales plunged. March 2009 marked the steepest drop—of 25 percent compared to March 2008—in sales volumes. Since April 2009, the rate of decline has steadily eased, thanks to the incentive measures implemented by the Japanese government, which I will touch upon. Although these measures did stimulate demand since last April, one of them—namely, the purchasing subsidies—ended, in fact, on September 7th this year. As a result, sales in September this year showed a minus 1.2 percent compared to the same month in 2009. Government incentive measures (tax reductions and purchasing subsidies) go into effect Source: JAMA

Actual & Projected Trends in New Motor Vehicle Sales in Japan, 2001-2010 This graph shows the actual and projected trends in new motor vehicle sales in Japan from 2001 through 2010. The white sections of the bars represent passenger car sales, and the blue sections represent truck and bus sales. In 2009, the Japanese government’s incentive measures for eco-friendly vehicles did stimulate demand in the second half—especially for standard and small passenger cars—but sales for the entire year fell below 5 million units—to 4.6 million units. In 2010, Japan’s economy should make a moderate recovery, and overall demand is likely to rise thanks to the incentives. Consequently, our forecast is that vehicle sales will reach almost 4.80 million units this year, up 4.1 percent from last year. (Projected) Sources: JAMA; Japan Automobile Dealers Association; Japan Mini Vehicles Association

Government Measures to Support the Automotive Industry in Japan Key Objectives ◆ Counter declining demand in the domestic new-vehicle market, and promote the revitalization of the automobile industry, which is essential to national economic recovery. ◆ By promoting the purchase of eco-friendly vehicles, accelerate the shift to low-carbon transport. Specific Provisions ◇ Acquisition & tonnage tax cuts for eco-friendly vehicles  Effective period—For the acquisition tax: 1 April 2009-31 March 2012 For the tonnage tax: 1 April 2009-30 April 2012 ◇ Eco-friendly vehicle purchasing subsidies 　　  Effective period—10 April 2009-7 September 2010 This slide shows the auto market measures introduced by the Japanese government, which I explained at last year’s Council Meeting. Since the purchasing subsidies ended this September, as I just mentioned, the measures that are still in application now are the acquisition and tonnage tax reductions for eco-friendly vehicles. I would like to remind you that there are two main initiatives, aimed at (one) stimulating a recovery in new vehicle sales, and (two) accelerating the shift to low-carbon transport.

Impact of the Japanese Government's Support (1) Recovery of new vehicle sales ◇　The government’s double-incentive scheme stimulated demand. However, October sales are likely to decline, as a consequence of the termination of the purchasing subsidies. (2) Significant growth in the use of eco-friendly vehicles 　　 ◇ Eco-friendly vehicles steadily expanded their share in the new vehicle market: April 2009: 42.5% ⇒ August 2010: 80.4% ◇ Alternative-energy vehicles (electric vehicles, plug-in hybrid vehicles, clean diesel vehicles, etc.) increased their share in the new vehicle market: Fiscal 2008: 2.6% ⇒ fiscal 2009: 9.9% ⇒ Apr-Aug 2010: 10.8% The impacts of the Japanese government’s support are outlined here. One result of the government’s double-incentive scheme was the recovery of new vehicle sales. Sales have recorded year-on-year growth since last September. However, as a result of the end of the purchasing subsidies, October sales are likely to decline. A secondary impact has been the expanding share of eco-friendly vehicles in new vehicle sales overall. From under 50 percent in April-May last year, the share of new vehicles eligible for the purchasing subsidies increased to over 80 percent this August. As a result, the share of alternative-energy vehicles in total new vehicle sales rose from 2.6 percent in 2008 to 10.8 percent in 2010. The government incentives are thus accelerating the replacement of the national fleet with much cleaner vehicles. About 10 million of the 75.5 million vehicles on Japan’s roads today are over 13 years old. In view of the data I’ve just cited, we can assume that, for as long as the incentives are in effect, the transition to low-carbon road transport will be carried out at a faster pace than it would be otherwise.

Thank You! Thank you for your attention.