New vehicle sales in Japan have seen a decrease for the first time in three years following the introduction of a tax increase in the fourth quarter of 2019, Nikkei Asian Review reports. Approximately 5.2 million vehicles were purchased last year, compared to 5.27 million units sold in 2018.

The downturn has been attributed to the consumption tax which was increased from 8% to 10% on October 1, which consequently saw year-on-year sales decrease by 25% for October and down by 13% in November. December figures are expected to underperform as well, the report said.

This downward trend is expected to carry over through the coming year. The Japan Automobile Tyre Manufacturers Association expects sales of just under 5.1 million vehicles for 2020, down from the aforementioned 5.2 million vehicles sold in 2019. New mainstream models such as the Honda Fit/Jazz and Toyota Yaris are due to go on sale in the country this year, however a weak environment for consumer spending is likely to further depress demand, the trade association said.

Japanese automakers see the domestic market as undergoing transformation by trends such as vehicle sharing as well as young people who are growing less interested in car ownership, the report said. Vehicle-sharing services in Japan saw 1.2 million registered users in 2019, which equalled 3.5 times the tally in 2014, according to the Foundation for Promoting Personal Mobility and Ecological Transportation in Tokyo.

The decline is only set to continue, as the Japan Automobile Dealers Association expects that demand for new vehicles will drop by more than 30% from 2018 to 3.47 million units in 2040.