Global automotive forecasting and advisory firm CSM Worldwide expects Japanese light vehicle sales in 2007 to run the sluggish course amid the country's economic recovery.

Sales are forecast to plateau, marginally up 0.3 percent to 5.43 million units, which would be the second lowest level, which trails the pervious year, in the past two decades.

According to CSM economists, a combination of factors drives this projection:

- Domestic car sales, excluding mini cars, marked 18 consecutive months of decline in December 2006 as cost-conscious buyers flock to mini cars, whose market share accounts for roughly 37 percent.

This trend will continue and further push overall volume down through the next decade.

- Auto sales are affected by some negative economic factors such as population growth, a lower birthrate, a phase-out of tax breaks, a rising consumer tax and soaring oil prices.

- These economic anxieties are interwoven with the constraints of Japanese market characteristics: ownership has leveled out at a plateau of 600 units per 1,000 population, improved quality has extended vehicle life cycles and the limited amount of land forces Japan to have the most developed and sophisticated network of public transportation, which slows further incremental demand of cars in Japan.

From the perspective of model launches, the count of new revamped models will decline from 57 in 2006 to 50 in 2007.

In other words, 2006 incremental sales due to new/revamped models in both 2005 and 2006 amount to 2.31 million units, while the equivalent, new launches in 2006 and 2007, drops 19.6 percent to 1.86 million units in 2007.

This indicates that the new/revamped model effect through 2007 is lower than in 2006 due to the smaller model count as well as fewer vehicles stimulating demand with higher sales volume.

Key models are the Toyota Corolla (185,000 units; October 2006), the Daihatsu Move (166,000 units; October 2006) and the Daihatsu Mira (119,000 units; October 2006).

Key launches are the Mazda Demio (2Q 2007), the Toyota Voxy Noah (2Q 2007), the Toyota Premio and Allion (2Q 2007), the Toyota ist (3Q 2007) and the Honda Fit (4Q 2007).

Toyota Group (including Daihatsu and Lexus) is forecast to maintain its market share lead with a gain of 0.2 points to surpass 42 percent, followed by Nissan, Suzuki and Honda.

Nissan is lagging behind Toyota in incremental volume from new launches and will have to wait until 4Q 2008 to fully recover its domestic sales when its flagship model, the Cube, is unveiled.

Meanwhile, carmakers with an emphasis on mini vehicles such as Daihatsu (a Toyota subsidiary), Suzuki (the top mini car producer) and Honda will sustain their business through 2007.

Japanese auto sales still hinge on the small car segment, which consists of mini cars, subcompact cars and compact cars.

The segment will maintain its share of around 58 percent in 2007.

However, while sales of mini cars reached a record of more than 2.0 million units in 2006, their popularity will gradually lose steam through 2007.

Instead, the compact car segment will play a crucial role by gaining the most points of share (+1.6) due to the fully remodeled, best-selling Corolla.

The segment race in share gains is followed by compact SUV (+0.4) and compact MPV (+0.3), while subcompact car (-0.7), large MPV (-0.6) and midsize car (-0.2) are shrinking.

CSM Worldwide provides trusted automotive market forecasting services and strategic planning solutions to the world's top automotive manufacturers, suppliers and financial organizations.

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