Shayne Heffernan has issued a strong buy on Toyota Motor Corporation (ADR) NYSE:TM with a price target of $100 in 2011 based on the latest car sales in Japan.
The number of new cars, trucks and buses excluding mini vehicles sold in the country last year came to 3,229,716 units, up 10.6 per cent from 2,921,085 the previous year, according to the Japanese Automobile Dealers Association.
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Toyota’s Prius petrol-electric hybrid car, low on greenhouse gas emissions, has been Japan’s top-selling car for about one and a half years.
In 2010 the world’s biggest automaker sold more than 315,000 units of the Prius in Japan, making it the best-selling car in the country for a single year, a record set by the company’s Corolla in 1990.
The association said the sector’s gain in 2010 was mainly due to a popular subsidy to encourage motorists to buy eco-friendly cars, which lifted demand and tempered the crippling effects of the financial crisis.
But last month new vehicle sales dropped 28.3 per cent from a year earlier to 179,666, the fourth straight month with a year-on-year drop.
Sales have fallen every month since the end of the subsidies, the association said.
The end of the scheme dealt a blow to automakers, which were already struggling to cope with the yen’s strength against other major currencies, forcing them to scale back production.
A strong yen erodes exporters’ incomes when repatriated while making their products more expensive and less competitive abroad.
But Shigeru Matsumura, auto analyst at SMBC Friend Securities, said the sector should recover from the end of the subsidies as the world emerges from the downturn and overseas demand picks up.
“The negative impact of an end to the incentives is subsiding gradually as Japanese carmakers are trying to stimulate market sentiment by introducing new models from now on,” Mutsumura told AFP.
“We forecast the sales decline will hit bottom in the January-March quarter and then be on course for moderate recovery.
But the pace of recovery fully depends on Japan’s macroeconomic conditions.
“Japanese carmakers are expecting to show strong performance overseas thanks to growing auto demand in emerging economies, notably China, and an expected recovery in North America,” Mutsumura added.
For 2010, Toyota was the market leader in Japan with 1,531,722 units sold, up 13.8 per cent on the previous year, plus 33,365 vehicles of its Lexus brand sold in the country. Next came Nissan with 499,252 vehicles sold, Honda with 486,774 and Mazda with 173,802.
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