Japan Auto Saved by Exports

In today's Wall Street Journal, Arran Scott reports on Japan Auto's paradox in: Japan's Auto Makers Lift Output In Response to Growth in Exports.

Domestic auto sales in Japan have been on the decline and probably won't get better any time soon with the high price of gasoline in addition to the reality of a shrinking and graying population. The only bright spot is in mini-car sales in which Suzuki is leading the way.

Never mind however, because overseas demand is fueling a solid increase in domestic production that has to be bringing a smile to Japanese workers' faces since they too get to share more in Japan Auto's success. Only Nissan and Mitsubishi experienced a decrease in July domestic production.

The proof is in the numbers:

Toyota boosted its domestic production in July by 11.5%. Its July exports jumped 25.9%, domestic sales dropped 2.4% and overall world-wide production increased 8.5%.

Honda increased its domestic production in July by 8.9%. Its July exports surged 26.7%, domestic sales declined 5.4% and overall world-wide production increased 6.2%.

Mazda's numbers were +36.1% for exports, -12.3% for domestic sales, and a 15.8% increase in domestic production.

Comment: Japan's Big-3 trade in the U.S. as you might already know: Toyota (TM), Nissan (NSANY), and Honda (HMC). The others such as Mazda, Mitsubishi, and Suzuki could possibly be bought OTC in the U.S. with help from your broker but for liquidity it's best to consider a purchase/sell on the Tokyo Exchange.

A Bloomberg.com article from earlier in the month suggests there could be political issues for Toyota given its apparent necessity to supply cars made in Japan to meet strong U.S. demand. The article said that on the year through July, 45% of Toyota's sales in the U.S. were imports from Japan, a 34+% increase over last year. Also, through July 55% of Toyota's sales were from N. American plants versus 63% last year and 78% each for rivals Honda and Nissan.

Lastly, Nissan's ADRs have been hot again since about mid-August after a jump in late-July. This can likely be attributed to anticipation of its launch of new autos coming this autumn. Compared to Honda and Toyota, Nissan has the lowest P/E ratio of the three and also sports the highest dividend yield. Its per share price is also the cheapest. It seems poised to trade higher and could really breakout later this year on news of strong initial market acceptance of its new models.

Two charts follow -- notice the difference in the one-year versus the year-to-date.

One-year Comparison Chart of U.S. and Japan Big-3:

YTD Comparison Chart of U.S. and Japan Big-3: