Car sales in Japan reached
283,544 in May, 5.3% above the 269,318 of last year. That took YTD growth to 4.4% at
1,803,084 from 1,727,022 and made it four months running that sales were above year ago
levels. The annualised selling rate is now approaching 4.2 million, and that is probably
where the year will end because much of the growth is due to legislative changes rather
than genuine underlying demand.

Most of the gains have been
racked up by those manufacturers that are building micro cars for the Japanese market. The
change in the law which stated that such cars had to be bigger and safer led to a plethora
of new models hitting the market place at the same time and that act alone brought a
return to growth for the market. In addition there have been some important but slightly
larger cars that have captured the fancy of the car buying public and that has also served
to stimulate growth. In particular there has been the Suzuki Wagon R and the new Toyota
Vitz (which will be built in Europe as the Yaris). Both of these vehicles will be tested
by WAIT during the course of the next five weeks.

Nissan is in real trouble,
and just how much is only just being realised by Renault. It is very likely that the
French company will find Nissan to be as big a problem to solve as Rover has been for BMW.
Nissan has three all-new models planned for 1999, and four for both 2000 and 2001, yet
they desperately need to get into the platform sharing mode with Renault much sooner than
2002. The problem that Nissan and Renault face is that their new model programmes are way
out of sync with each other. In the Small Car sector Renault replaced the Clio in 1998 and
the next new Clio is due in 2004. The Nissan Micra in that same sector is planned to be
replaced in 2001.

In the Lower Medium sector
the Renault Mégane is replaced in 2002 whilst the Nissan Sunny is scheduled for 2003, but
that is close enough to be dragged forward. In the Upper Medium sector the Renault Laguna
replacement comes along next year but the Nissan Primera gets replaced in 2001, and both
are probably too far advanced in development for anything to happen there. It is the other
way round in the Executive sector with the Nissan Maxima making its debut next year and
the Renault Safrane replacement coming in 2001. In the People Carrier sector the Nissan
Serena is replaced in 2001 and the excellent Renault Espace in 2002.

Meanwhile Nissan continues
to drip red ink over its performances. Sales of domestically produced Nissan models
plunged by 13.0% to 267,679 from 307,816 and there is a very real chance that they will
lose their number two slot in the market to a rampant Honda who have demonstrated that
they can outsell Nissan in odd months, and just need a bit more consistency in order to
make the threat a promise.

One big change that has
occurred almost without notice is that Mercedes-Benz have overtaken Volkswagen to become
the biggest non-Japanese importer of cars into the market. That came about because
Mercedes has been able to boost sales by 38.1% to 23,292 from 16,865 whilst Volkswagen
just about matched the market average with growth of 4.3% to 18,871 from 18,097.

Most of the importers are
trailing year ago results and that is a position that is unlikely to change in the
foreseeable future. There will clearly be exceptions, as Mercedes has demonstrated, but by
and large the importers will bear the brunt of most of the woes in the market place.