New vehicle sales in Japan slumped to the lowest level in three decades in 2008 as recession hit Asia's biggest economy, piling pressure on its auto giants, an industry group said on Monday.
Domestic sales, excluding mini-vehicles, tumbled 6.5 percent from the previous year to 3.2 million units for the fifth straight annual decline, the Japan Automobile Dealers Association said.
It was the lowest level since 1974 in the wake of the first oil shock, when automakers had sold 3.1 million vehicles. Auto sales reached a peak of nearly 6.0 million units in 1990.
"It is a very serious situation," said Takeshi Fushimi, the association's director. "In the throes of a kind of economic slump that occurs once in a century, consumers' sentiment has rapidly cooled."
The sales slump worsened towards the end of the year. In December alone sales fell 22.3 percent from a year earlier to 183,549 vehicles.
"Consumption has stalled since mid-October but we had not expected it to plunge so much," Fushimi said.
He said affluent consumers continued to put off car purchases as the value of their investments in shares and foreign currencies eroded in the global financial crisis. Stagnant growth in wages has also curbed car sales to young people.
The association predicted sales would keep slipping, setting a 2009 target of slightly over three million units.
The Japanese auto market has been shrinking in recent years as many young people shun cars, particularly in cities, due to sluggish wages, high fuel costs and the wide availability of public transport.
The global economic downturn has taken a heavy toll on Japanese automakers, which rely heavily on exports for their earnings, leading them to cut thousands of jobs.
Japan's top carmaker Toyota Motor Corp. last month forecast an operating loss of 150 billion yen (1.6 billion dollars) for the financial year to March 2009, which would be its first ever annual loss.
Toyota president Katsuaki Watanabe said Monday he expected that demand would turn upward in the second half of the year.
"But I think it will be difficult to go up all at once. The rise will be gradual," he told reporters.
Honda Motor Co. and Nissan Motor Co. have also been hit by falling earnings, although they are still in better shape than their US rivals, which have been forced to seek a government bailout to stave off bankruptcy.
"Although we need to look at very tough possibilities, it is still our obligation to manage the company in a steadfast manner," Nissan chief operating officer Toshiyuki Shiga told reporters.
Honda president Takeo Fukui said the yen's upsurge against the dollar, which hurts Japanese exporters, has made it difficult to secure jobs for workers.
"But we want to do our best to secure employment," he said.