Source: Used car export official account

In 2023, Japan's second-hand car exports reached a historic high, with an estimated annual export volume of over 1.6 million vehicles. This growth momentum will continue in 2024 and is expected to break historical records for two consecutive years. Here is a re outlook for this year.

The exchange rate of the Japanese yen in 2024 is not conducive to the export of used cars, but it has not hindered their growth

One of the reasons why second-hand car exports reached a historic high last year was the depreciation of the Japanese yen against the US dollar. The main reason is that the interest rate difference between the United States and Japan continues to widen. For a long time, both countries have implemented loose monetary policies, but the United States tightened its monetary policy in March 2022, leading to an widening interest rate gap between the two countries.

Therefore, this year's focus is on how long this trend will continue. At present, the United States (FRB) maintains interest rates unchanged and will implement loose policies (interest rate cuts) starting from this year. Therefore, even if Japan (Bank of Japan) continues to implement zero interest rates, it is difficult to imagine that the interest rate gap will further widen, and the yen will basically fluctuate and rise, which is not conducive to exports.

Assuming that the annual interest rate cut in the United States is about 1% (the sum of three rate cuts), it is expected that the year-end interest rate will remain stable at around 130-135 yen.

If the yen appreciates to this extent, it can be said that the decline in Japan's second-hand car market this year is enough to digest and absorb it, and it will not be affected.

In 2024, the domestic second-hand car prices in Japan are showing a downward trend, and exports are also increasing accordingly

In 2023, new car sales began to recover, with a total of approximately 4.8 million units sold. This has led to an increase in the supply of used cars (trade in), with over 8 million cars auctioned off after 15 years. It is precisely because the increase in supply is conducive to increasing the export volume of used cars.

This year, new car sales are expected to maintain strong momentum as car manufacturers will shift towards resuming production to recover sales losses caused by the pandemic. In 2024, it is expected to increase by 10% compared to the previous year, and with an additional 500000 vehicles, the annual sales will reach 5.3 million vehicles (including 300000 imported vehicles). In this way, the supply of used cars will be significantly higher than last year, but due to the relatively stable retail demand for used cars in Japan, the supply will increase to some extent, and market prices will decline compared to last year. It is expected that Japan's second-hand car exports will exceed 1.6 million units in 2023. (Editor's note: Vehicles exported from Japan with second-hand cars below 200000 yen are not included in the statistical range.)

Container supply continues to expand, transportation costs continue to decrease

For Japan, no matter how strong the demand in the destination country is, the domestic supply of used cars expands. Without meeting the demand through sea transportation, Japan's used car exports cannot operate normally. In recent years, due to the rapid V-shaped recovery of China's exports after the epidemic and the increase in residential consumption in Europe and America, the transportation volume has continued to increase, resulting in a global shortage of containers and an increase in shipping costs. However, starting from September of the previous year, there was a turnaround in container supply, with an increase in supply and a decrease in transportation costs. The main reason is that with the slowdown of freight volume due to the trade friction between China and the United States, China, which accounts for more than 90% of global container production, once reduced production. However, in recent years, the rapid growth of demand has led to an increase in production, oversupply, and a large influx of containers into the market, ultimately promoting the increase in used car exports last year. (Editor's note: The average export price of used cars in Japan ranges from $3000 to $5000 (FOB offshore amount). Due to the lower price of containers in 2023 compared to roll on/roll off ships, container export models are mostly used throughout the year.)

This year, due to the upcoming delivery of new ships, prices will continue to decline. Therefore, with the decrease in shipping costs and the increase in container supply, there is sufficient capacity to absorb the demand for second-hand car exports exceeding last year.