Japan's scrappage scheme has given its domestic market a massive boost - particularly with its extension to September this year - but the automotive sector must brace itself for a fall once the incentive ends.

"The best-case scenario is US$4,000 from the government to buy a car when scrapping a 13-year old vehicle," Deutsche Bank - Deutsche Securities Japan global auto team director Kurt Sanger
told just-auto from Tokyo.

"By extending it [scrappage] for another six months, you allow the global economy a further six months to lick its wounds. The improvements in sales have been quite dramatic, particularly if you break it down by segment - month on month improvements have been pretty sharp."

The major Japanese manufacturers have really benefited but look likely to be affected by what Sanger estimated would be a 19% decline in the Japanese non-minivehicle market.

Nonetheless, Sanger cited Toyota's extraordinary growth of 55% versus a market growth of 22% with the Prius particularly recording a "staggering" quarter of the manufacturer's sales. "A potential one in five cars selling is a Prius," he said.

One surprising element of the Japanese scene that appears to have resolutely defied global trends is the move towards electric vehicles. "The EV market is nearly non-existent," noted Sanger.

"There is Mitsubishi Motors but they are really government contracts and [Subaru maker] Fuji Heavy Industries. So far it is not market volume to speak of. We just don't see Toyota with an electric car.

"If you look at who is pushing EV here, it is companies who have very few other options. The models you see on the road now arguably are not terribly sophisticated - it is hard to see how EVs will get significant traction."

Despite such reticence, Sanger nonetheless predicted further subsidies from the Japanese government targeting fuel efficient models such as hybrids."

The Japanese tariff system remained "not terribly punitive" in Sanger's eyes, although he cites smaller distribution systems used by foreign importers as a reason behind overseas models' relative high cost.

In terms of Japanese export markets, it is clearly the US dominating manufacturers' targets, although a company like Toyota would not be able to justify local American production for models such as the Yaris (aka Vitz) or Honda with its Jazz (Fit).

"Those two will require around 100,000 units before they start local build," noted Sanger, adding Nissan clearly has a production footprint neighbouring the US with output from Mexico.

Outside the US, key export markets are obviously the BRIC [Brazil, Russia, India, China] countries, although Sanger concedes: "China is the only significant one for most of the Japanese manufacturers now. Nissan and Toyota would like to see a rebound in Russia, it is about laying a foundation."