Automobile industry demands lower taxes

Tokyo: Surrounded by dozens of cardboard boxes packed with four million petition signatures, the presidents of major Japanese automakers demanded yesterday the end of what they called exorbitant taxes on cars that threaten to hollow out manufacturing and wipe out jobs.

The plea from the heads of Toyota, Nissan, Honda as well as representatives from auto unions and dealers — a rare show of combined forces — underlines the industry's crisis from the March tsunami disaster, the surging yen and stagnant sales.

"This goes beyond the problem of a hollowing out of the economy. The industry could be destroyed," Toyota President Akio Toyoda said after standing with other officials with clenched fists. "Once jobs are lost overseas, it is impossible to recover them."

The officials said they want to retain manufacturing in Japan as much as possible to keep technological development going, as well as protecting jobs.

But the odds are stacked against them, they said, partly because of a complex system of taxation on cars estimated to be about twice or triple those in Great Britain and Germany, and a whopping 49 times the US. Also battering Japan's manufacturers has been the strong yen, which eats away at the value of overseas sales. Each time the dollar falls by one yen, the eight major Japanese automakers lose 80 billion yen (Dh3 billion).

Public opinion

The auto execs appear to have public opinion on their side. They were taking to the government a petition demanding the end of such taxes, signed by more than 4.3 million people in just two months.

Japanese taxes, which are paid each year for ownership in addition to the time of purchase, are so high that over a decade a car owner pays more in taxes than their original outlay on the vehicle, they said.

Reducing the tax burden would potentially add some 920,000 vehicles to annual auto sales in Japan, according to a government estimate.

Japan's annual sales of new autos have shrunk to about 4.25 million vehicles, falling from a peak 7.8 million vehicles in 1990.

Studies show younger people's interest in cars has been fading rapidly, especially in urban areas. Rural residents tend to need more than one car per household, but are suffering from the heavy tax burden.

The March 11 earthquake and tsunami in northeastern Japan disrupted parts supplies and slowed production, battering the profits at the Japanese automakers. Just as they were starting to recover and make up for lost production, the recent flooding in Thailand has disrupted the supply chain again.

Toyoda said Japan needs to recover from the disaster, and help for the auto industry is critical in the recovery. "Please look at all of us who are here today," he told reporters at a Tokyo hotel. "We want to speed up the recovery so we are all here."

The representatives also asked that tax breaks on green cars, which began in 2008 and are set to end next year, be continued to keep sales of hybrids and electric vehicles going.

"The sense of crisis we have is unprecedented," said Nissan Chief Operating Officer Toshiyuki Shiga.