Why Japan's auto market shrunk to allow India to overtake

India leapfrogged Japan recently to become the world's third largest automotive market, behind China and the United States. Nikkei Asia reported that more vehicles were sold in India in all of 2022 than were sold in Japan, a major achievement for the South Asian country which has seen demand rise exponentially across most segments. But while the Indian automobile industry has been on the rise, the Japanese automotive market has had to fight challenges as well.

According to the Japan Automobile Dealers Association and the Japan Light Motor Vehicle and Motorcycle Association, a total of 4.20 million vehicles were sold in the country last year. India edged ahead with 4.25 million units of vehicles being sold, as per the Society of Indian Automobile Manufacturers.

Several similar challenges have emerged since Covid struck the world with the global automotive industry still not in free waters. But the impact in Japan has been rather severe. New car sales in the country in 2022, for instance, were the lowest in 45 years. It was in 1977 when the industry saw similar sales figures.

Domestic auto sales fell for the fourth consecutive year. While Suzuki and Mazda were in the green vis-a-vis figures from 2021, Toyota and Mitsubishi were among the companies that saw biggest declines. Japanese companies aren't faring too well overseas either with six automakers - Toyota, Honda, Nissan, Mazda, Mitsubishi and Subaru - witnessing combined sales coming down.

The near future outlook remains uncertain as there is still no clarity on when the semiconductor shortage is likely to ease and therefore for the demand to potentially pick up. Meanwhile closer home, manufacturers remain buoyed by continuing high demand despite high waiting times for most manufacturers.

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