South Korea's Finance Minister Bahk Jae-wan and Japan's Finance Minister Yoshihiko Noda

Japan car sales fall while South Korea booms

New car sales in Japan fell by more than a fifth last month as the supply chain disruption from the earthquake continued.

Japanese vehicle sales, excluding 660cc microcars, fell 23 per cent to 225,024 last month, marking the tenth straight month of declines.

However in neighbouring South Korea, Hyundai Motor and Kia Motors extended their strong run with double-digit growth, as Hyundai ate further into the market share of Japanese carmakers.

Japanese analysts remained optimistic, saying sales were well off the post-disaster trough while data has also shown an improvement from previous months as more parts become available.

"The trend of recovery is very clear," said Michiro Saito, general manager at the Japan Automobile Dealers Association.

"We remain somewhat uncertain of future demand, but we hope that new model launches will help fuel it."

Japanese auto sales fell by a third in May, the lowest total for the month since 1968.

An average 10,228 cars were registered per day in June, up from 7,482 in May and 5,441 in April, when cars were assembled at a significantly reduced pace with hundreds of parts still missing.

Toyota, Nissan and Honda, Japan's top three automakers, have all said they are close to being able to build as many cars as they had planned before the March earthquake, with only a few critical components still affected.

New vehicle sales including minivehicles in Japan, the world's third-biggest car market, slid 22 per cent to 351,828 in June.

Results varied across the brands, with Nissan showing a 4.2 per cent rise from a year ago while Toyota and Honda suffered declines of more than 30 per cent.

Nissan has restored production faster than its rivals, managing to build more vehicles in May while output at Toyota and Honda more than halved.

Hyundai and Kia extended their industry-beating march after sales accelerated in the past few months as earthquake-hit Japanese rivals suffered from a dearth of products.

The pair rank fifth in global car sale and are expected to report healthy sales and earnings in the second half, but would need to manage investors' expectations in the face of a weakening global economy, analysts said.

"The slowing global economy may deal a blow to consumer sentiment," said Yoon Phil-joong, an analyst at Samsung Securities.

"But there is pent-up demand for cars in the United States after the market collapsed in the wake of the global financial crisis, and consumers also place value on practicality during difficult economic times.

"Korean car makers are relatively safe."

Hyundai's global sales rose 12.3 per cent to a monthly record in June, helped by strong sales in the United States, China, India and South Korea.

Kia's sales surged 22 per cent.

Sales at top carmaker Maruti Suzuki India declined 8.8 per cent to 80,298 vehicles, marking the first fall since December 2008 and pushing its shares down as much as 2.6 per cent.

Production at Maruti, 54.2 per cent owned by Japan's Suzuki, was hurt by a strike last month that led to a production loss of about 16,000 cars.

Indian automakers sold 158,817 vehicles in May, up 7 per cent in what was the slowest pace of growth in two years.

Analysts expect a further slowdown as rising fuel prices, interest rates and vehicle prices crimp demand.

India raised diesel and petrol prices by about 9 per cent in the past two months.

"There will certainly be a shift from cars to two wheelers for the middle class who are looking to buy low-end cars, because they can save on costs," said Kishor Ostwal, chairman at brokerage CNI Research.

India's third-largest two-wheeler maker, TVS, reported a 14 per cent rise in June sales to 182,456.

Sales at Tata, India's largest maker of trucks and buses, fell 1 per cent to 66,358.

Sales of its Tata Nano, touted as the world's cheapest car with its lowest priced variant costing 151,907 rupees ($3,398), plunged 29 per cent.

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