WRAPUP 2-Japan May auto sales worst since 1968; Hyundai rises

Wed Jun 1, 2011 5:05am EDT

* Japan monthly sales fall by more than a third

* Toyota worst performer with 56.6 pct fall

* Hyundai May sales up 13.6 pct, Kia up 22 pct

* Maruti sales up 1.9 pct, slowest in 2 years

* New models, incentives from Japan may limit Korean gains (Adds details, quote)

By Mayumi Negishi and Neha Singh

TOKYO/MUMBAI, June 1(Reuters) - Japanese auto sales fell by a third in May, the lowest total for the month since 1968, as car makers struggled to restart production after the earthquake and tsunami that roiled the country in March.

South Korean rivals, on the other hand, continued to gain traction with Hyundai Motor and affiliate Kia Motors posting double-digit growth in sales driven by solid demand for new models.

Despite the ninth consecutive drop in monthly new vehicle sales, Japanese car makers are recovering faster than expected with market leader Toyota Motor expecting its output to return to 90 percent of its pre-quake levels by this month.

Still, overall production in 2012 could be almost a million vehicles less than Toyota had planned to build at the start of the year. Lost output by the end of May was 900,000 cars.

Nissan Motor Co and Honda Motor Co have also said they are working to bring production back to pre-quake levels as soon as possible, most likely during the financial third quarter from October-December.

"The earthquake put a chill on consumption in Japan," Michiro Saito, general manager of the Japan Automobile Dealers Association said on Wednesday. "Production will return to normal from June and that may provide a boost to sales."

Sales of vehicles, excluding 660cc minicars in Japan, fell 37.8 percent from the year before to 142,154 units last month. Toyota, the world's biggest automaker, led the drop with a 56.6 percent fall.

Combined with 660cc vehicles, tallied separately, new vehicles sales in the world's third-biggest auto market declined 33.4 percent to 237,364 vehicles, data showed on Wednesday.

Meanwhile in Europe, auto sales in France fell 8.3 percent in May on an adjusted basis, a decline attributed to the ending of government incentives to replace older models. [ID:nLDE7500DU]

HYUNDAI, KIA TO GAIN MARKET SHARE

South Korea's Hyundai and sibling Kia, which rank fifth in global car sales, saw robust sales growth in May. Hyundai's sales climbed 13.6 percent, while Kia's sales soared 22 percent as a jump in its overseas sales offset a dip in sales at home. [ID:nS6E7FQ023]

But their May sales inched down from the preceding month and weighed on high-flying shares in both companies.

"The monthly sales decline came as a good reason to sell, particularly following the shares' rally and current uncertain global economic backdrop," said Choi Dae-shik, an analyst at HI Investment & Securities

Hyundai Motor shares fell 3.6 percent and Kia shares fell 3.7 percent in a flat market. Both stocks have surged by nearly 50 percent this year.

Investors are waiting for U.S. sales numbers to be released on Wednesday to gauge whether the South Korean duo will gain share from Japanese car makers in the key market. [ID:nN31152084]

"A risk for South Korean car makers is an intensifying competition as Japanese rivals are rolling out new models and raising incentives," said Lee Sang-hyun, an analyst at NH Investment & Securities.

The combined market share of Hyundai and Kia is expected to hit a record high for May in the U.S. market after reaching 9.4 percent for April, thanks to brisk sales of Hyundai's Sonata sedan, Elantra compact and Kia's Optima sedan, analysts say.

Their combined May sales may surpass Toyota Motor for the first time in the United States, media reports said, citing a forecast by TrueCar.Com.

INDIA DEMAND TO SLOW

India's largest automaker, Maruti Suzuki , posted its slowest growth rate in more than two years, with a 1.9 percent rise in total sales to 104,073 units.

Indian automakers overall sold 162,825 units in April, up 13 percent from a year ago, the slowest pace in nearly two years. [ID:nBMA009417]

"I think they are feeling the pinch of rising costs," said Kishor Ostwal, chairman of brokerage CNI Research. "Higher fuel prices and rate hikes are beginning to show their effects and some demand will be shifted from four-wheelers to two-wheelers, particularly in lower-end car models."

India's third largest two-wheeler maker, TVS Motor Co , posted an 18 percent jump in May sales to 185,930 units, a record for the company.

Tata Motors , India's largest truck and bus maker posted a 10 percent rise in May sales, while the country's largest utility vehicles and tractor maker Mahindra & Mahindra's sales grew 20 pct. [ID:nWNAS2280]

Sales at Tata Motors were driven by an 84 percent rise in sales of the Tata Nano, touted as the world's cheapest car.

Vehicle sales in India, one of the fastest-growing auto markets in the world, grew a record 30 percent in 2010 as the burgeoning middle class in Asia's third-largest economy spurred demand. That growth is expected to halve to 12 to 15 percent this year.

Indian car makers have expressed concerns over rising commodity prices and have raised vehicle prices by an average 1.5 to 2 percent this year to offset cost pressures.

Demand is also expected to slow because fuel prices rose by a record 8.6 percent in May and interest rates are likely to be raised in June. (Additional reporting by Aniruddha Basu in Mumbai, Hyunjoo Jin in Seoul, Tim Kelly and Kentaro Sugiyama in Tokyo; Editing by Matt Driskill)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
triplehex wrote:
New cars coming out of Japan should be self propelling with all the radioactivity contaminating everything there. Automatonic consumers in complete denial will mindlessly continue to buy from this newly created dead zone.

Jun 01, 2011 9:20am EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.