GOJ INCENTIVES FOR ECO-FRIENDLY VEHICLES

UNCLAS SECTION 01 OF 02 TOKYO 000890

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E.O. 12958: N/A
TAGS: EIND ETRD SENV PREL WTRO ENRG JA
SUBJECT: GOJ INCENTIVES FOR ECO-FRIENDLY VEHICLES

REF: TOKYO 850

SENSITIVE BUT UNCLASSIFIED. CONTAINS BUSINESS SENSITIVE
INFORMATION.


1. (U) Summary: The GOJ stimulus package Prime Minister Aso
announced April 10 includes measures to encourage purchase of
environmentally friendly automobiles. Although some imported
European brands would benefit from the incentive, no U.S.
autos now appear to qualify. American automakers reps here
continue to deliberate their public response to the measures.
End Summary.


2. (U) Ministries are now working on various aspects of the
general economic stimulus package that the PM announced April

10. The detailed package is expected to go to the Diet April

27. Among the measures now included in the package are two
specifically targeted to autos.

--"Scrap" Incentive: This measure is a 250,000 yen ($2500)
incentive for consumers who purchase a new passenger vehicle
that meets Japan's 2010 fuel-efficiency (FE) standards and
who "scrap" a vehicle 13 years or older. For light "kei"
vehicles (660cc vehicles),the incentive is 125,000 yen
($1250). "Scrapping" a truck or bus to purchase an eligible
vehicle entitles purchasers to receive a payment of 400,000
yen ($4000) for small (3.5-ton) vehicles; 800,000 yen ($8000)
for mid-sized (eight-ton) vehicles, and 1,800,000 yen
($18,000) for large (12-ton) vehicles.

--New Purchase Incentive: This initiative targets consumers
who purchase vehicles with a "high level of environmental
performance." Those purchasing vehicles with a "four star"
rating, which also performs 15 percent above 2010 FE
standards, would receive 100,000 yen ($1000) for passenger
vehicles and 50,000 yen ($500) for light "kei" vehicles.
(Note: The "four star" rating is based on a system
established by the Ministry of Land, Infrastructure,
Transportation and Tourism (MLIT). End Note.) The measure
applies to consumers who purchase trucks and buses that meet
2015 FE standards, except for nitrogen oxide and particulate
matter, for which the vehicle must exceed the standard by 10
percent (i.e., a further 10 percent reduction in emissions).
Purchasers of these vehicles would receive 200,000 yen
($2000) for a small (3.5-ton) vehicle; 400,000 yen ($4000)
for a mid-sized (eight-ton) vehicle; and 900,000 yen ($9000)
for a large (12-ton) vehicle.


3. (U) The proposed incentives would apply retroactively for
autos purchased after April 10. A draft of the measures
estimates they will cost the government 370 billion yen.
Some media reports speculate the measure, in conjunction with
recently passed automobile tax exemptions and reductions,
could boost auto sales by one million units, presumably over
the next year.

Response from Japan Auto Importers Association (JAIA)
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4. (SBU) The Japan Auto Importers Association (JAIA),which
represents foreign auto makers including GM, Ford, and
Chrysler, had hoped for broader measures, JAIA
representatives told emboffs April 10. In mid-March, JAIA

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wrote the Ministry of Economy, Industry and Trade (METI)
requesting "economic support measures for new vehicle
purchases that can stimulate buying motivation of consumers
more widely and directly." Specifically, JAIA proposed a
five percent government rebate on purchases of new vehicles
for consumers who replace vehicles nine years old or older.


5. (SBU) Although METI was supportive of JAIA's request, the
Ministry of Finance (MOF),according to the JAIA
representative, wanted more targeted measures and a focus on
eco-friendly vehicles. Without the focus on environmental
measures, he continued, it would appear as though the
government was providing subsidies too broadly, and the
public would not support the measure.


6. (SBU) Among JAIA's members, some German automakers would
benefit from the GOJ proposal, but American and French
automakers would not, the representative asserted. Most
imported cars became popular in Japan because of their
"foreignness," and many -- especially the U.S. autos -- are
luxury vehicles with low fuel efficiency, he continued. For
this reason, the new stimulus measures will not assist
foreign automakers. However, it would be helpful to U.S.
automakers if the GOJ could find ways to support the flexible
fuel vehicle (FFV) that accepts up to 85 percent ethanol.

Big Three Automakers Pessimistic
--------------


7. (SBU) Members of the American Chamber of Commerce in
Japan (ACCJ) American Auto Industries Committee also report
no U.S. autos sold in Japan would qualify for the incentives
as currently described. One U.S. auto executive here fears
that once consumers realize American cars will not qualify
for the incentives, the reputation of U.S. automakers -- that
they have not developed clean vehicles -- will be reinforced.
The GOJ's proposals are therefore "a non-tariff barrier and
are protectionist," the Chrysler representative said April 17
in a meeting with us and with other U.S. automakers. (Note:
His Ford and GM counterparts were present but did not support
his remarks or otherwise comment. End note.) The three
automakers, under the auspices of the ACCJ American Auto
Industries Committee, are drafting a formal coordinated
response for public release.
ZUMWALT