Section 1. The Post-bubble Japanese Economy and Domestic Market

Item 2. Recreational Vehicles and Compact Cars Take the Lead

Changing customer preferences

The Japanese new vehicle market (excluding minivehicles) which had grown to 5.98 million units in 1990 (7.77 million units including minivehicles), lost its momentum with the collapse of the bubble economy and shrank in size to 5.75 million units in 1991 and to 4.89 million units in 1993. The economic recession thus led to a marked slump in corporate demand, which impacted the automotive industry.

After the collapse of the bubble, individual customers' vehicle preferences also began to show a major change. In the bubble period, luxury vehicles and large vehicles enjoyed a peak of popularity. By vehicle type, sedans dominated the passenger car market with around 70 percent of the total. From around 1991, however, recreational vehicles (in Japan, a category of passenger-car-size vehicles, different from large camping vehicles, aimed at consumers who like outdoor leisure activities), led by the Mitsubishi Motors Pajero, enjoyed a boom especially among younger age groups, while non-sedan models such as the Legacy station wagon of Fuji Heavy Industries Ltd. also began to show a rapid expansion of sales. Behind this lay a change in consumer demand brought about by the collapse of the bubble, which meant that individuality and function were now valued more than luxury status. The Odyssey, released in 1994 by Honda Motor Co., Ltd., enjoyed massive popularity and led the subsequent minivan boom.

In parallel with the recreational vehicle boom, there were also increased levels of demand for compact cars and minivehicles, which offered a low-priced and highly practical non-minivehicle option. In January 1990, a regulatory amendment increased the maximum length for the minivehicle category by 10 cm to 3.3 m and the maximum engine displacement from 550 cc to 660 cc, attracting interest especially among female drivers. In 1990, minivehicle sales reached a record level of 1.8 million units, and although there was a decreasing tendency from then until 1993, growth returned in 1994 and sales recovered to 1.72 million units in 1995.

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