Aq Summer98

Japanese vehicle sales continue steady climb in Canada

Sales

For the first half of 1998, preliminary data shows that sales of Japanese brand
passenger cars and light-duty trucks have been rising at a steady pace, up 11.8% to almost
160,000 units at the end of June from 142,800 units in the same period last year.

For the 1st quarter of 1998, Japanese light vehicle sales grew by a modest 7.5% to
61,825 units through the end of March. Passenger car sales improved 5.9%, while light
trucks were up 12.6% for all JAMA Canada members combined. The torrid pace of sales in
1997 cooled considerably in early 1998 due in large part to the Great Ice Storm that
severely affected parts of Ontario, Quebec and the Maritimes.

But with the advent of spring, one of the busiest seasons for both automakers and car
dealers, sales once again accelerated, particularly in the light truck segment, including
sport utility vehicles, minivans and hybrid vehicles.

While passenger car sales for all brands improved only marginally, 0.8% in the first
half of 1998, JAMA Canada members saw their sales jump 8.9% to 122,000 units, representing
a 31.2% passenger car market share. With respect to light-duty trucks, overall sales in
Canada surged 9.5% with Japanese marques outpacing the market with a hefty 22.2% sales
growth over the first half of 1997, claiming an 11.2% market share.

Production

Vehicle production in the first quarter of 1998 at the three Japanese-affiliated plants
in Canada was slightly off the pace of the previous year, down 3.0% overall to 93,030
units. Output at Honda`s Alliston plant was up marginally 3.8% to 43,475 units, and Toyota
in Cambridge grew dramatically, up 66.2% to 40,855 units as their new 120,000 unit Corolla
plant accelerated towards full capacity. Meanwhile, estimated production at CAMI plunged
70% to 8,700 units due to soft demand for their current models, particularly in the U.S.
where 90% of output is sent.

CAMI is awaiting the start-up of their new compact sport-utility vehicle, the Vitara,
scheduled to begin in the fall of 1998.

During the same period, both Honda and Toyota will begin production of new models in
Canada. Honda of Canada Manufacturing will start making the new Odyssey minivan this
summer, which will replace the current Odyssey minivan now made only in Japan. Capacity at
the new $300 million plant in Alliston, Ontario is expected to reach 120,000 units
annually by 2000.

Toyota Motor Manufacturing Canada in Cambridge, Ontario is set to begin production of
the new Solara, a 2-door sport coupe based on a Camry platform, in the summer of 1998.
Initial capacity is expected to be 50,000 units annually.

Exports

As a result of integration of the industry in North America from various trade
agreements including the Auto Pact, the FTA and the NAFTA, the majority of vehicles
produced by automakers in Canada are exported, largely to the U.S. Honda, Toyota and CAMI
are no exceptions. In the first quarter of 1998, exports totalled almost 72,000 units, a
slight drop of 2.1% from the same period in 1997. Exports by Honda and Toyota rose 25.7%
and 72.4% respectively, while exports shipped from CAMI declined 81.1% along with their
reduction in output.

Overall, 77.3% of vehicles made by these three Canadian plants were exported in the
first quarter of 1998, up from 76.6% in the previous year.

Imports

Overall Japanese badged vehicle imports from Japan, the U.S. and Mexico in the 1st
quarter of 1998 climbed 55.5% to just over 74,300 units in response to the growth of
demand in the Canadian market. There are several popular models that are not made in
Canada, including some new compact sport-utility vehicles, which continue to be attractive
for Canadian consumers.

Shipments from Japan rose 76.9% in the first quarter to almost 45,000 units, while
shipments of light-duty vehicles from the U.S. and Mexico increased 31.2% to a little more
than 29,300 units. Overall, imports of cars were up 51.3%, while trucks jumped 109.2%
compared to the same period in 1997.

Preliminary figures for the 2nd quarter show imports from Japan beginning to soften as
unit imports in May and June dropped 12% and 20% respectively over the previous year. As a
result, during the 2nd quarter, imports from Japan rose marginally 1.6% while imports of
vehicles from the U.S. and Mexico climbed 18.1% compared to the same period in 1997.

Japanese Light Vehicle Sales in Canada in Units

Source: AIAMC, DesRosiers

Motor Vehicle Production in Canada

Motor Vehicle Exports from Canada

* estimated Source: JAMA Canada

Motor Vehicle Imports

Source: JAMA, JAMA Canada

Weak economy applies brakes to automakers in Japan

The malaise that began last summer with the Asian financial crisis, and which brought
the Japanese economy to a standstill, has been officially diagnosed as the worst recession
to hit Japan in the postwar period. These economic woes have had a direct impact on the
Japanese domestic auto industry as production and sales were sharply lower in the first
quarter of 1998.

Production

During the 1st quarter of 1998, vehicle output in all segments fell overall 6.8% to 2.7
million units. Cars dropped 4.9% while truck production sagged 13.4% compared to the same
period in 1997.

Exports

Exports to global markets overall experienced an 11.3% rise to under 1.2 million units.
Passenger car exports gained 17.3%, while trucks declined 9.5% over the first quarter of
1997.

Sales/Registrations

The poorly performing economy hit consumer confidence hard in the first quarter as
sales of new vehicles fell 20.7%. Both cars and trucks shared the pain, falling 20.4% and
21.3% respectively compared to the first quarter last year.

Import Vehicle Sales

Sales of imports were hit particularly hard, off 36.5% to 75,423 units as the market
dried up in the face of lower consumer demand and the added impact of a weakened yen.
Passenger car sales were down 34.2%, while trucks nosedived 65.7% compared to the previous
year. In spite of overall decelerating import sales in Japan, a record number of U.S.
built Cadillacs were sold in Japan in March 1998.

Motor Vehicle Industry in Japan – 1st Quarter 1998

source: 1,2 – JAMA  3 -JADA, JMVA  4 -JAIA

JAMA Canada disappointed by results of Auto Review

The decision by the Federal Government announced on June 10, 1998 not to change its
current discriminatory application of tariffs on imports of finished vehicles was a
profound disappointment to JAMA Canada.

While this was a difficult and controversial issue for the Canadian Government inasmuch
as it centred on the 33 year-old Auto Pact, the status quo under the current policy is not
an acceptable position.

At times during the two year review, the highly-charged debate was often subject to
exaggerated claims and misleading analysis which created the fear that maintaining import
tariffs on non-Auto Pact vehicles, even at 6.1 % in 1999, was the only measure that could
maintain investment and auto industry jobs in Canada. This widespread misconception made
any further unilateral changes to longstanding policies politically difficult.

Differential treatment under the fragmented auto policy now in place clearly favours
one group of automakers over others. For this reason, JAMA Canada will continue to seek
changes to establish a policy that is open, transparent and applied equally to all
automakers in Canada. At the same time, because 80% of all vehicles made in Canada are not
sold here, lowering tariffs on all imports would be beneficial for Canadian consumers.

In a related development, on July 3, the Government of Japan announced that it would
formally seek bilateral consultations with Canada over its automotive trade policies that
the Japanese Government feels are inconsistent with, or in violation of, trade rules
established in the World Trade Organization.

JAMA Canada would have preferred that the Canadian Government had used the opportunity
to address these issues domestically in the context of the Automotive Competitiveness
Review. While it remains to be seen whether this �no change� decision will have a
dampening impact on future investment, it is clear that this decision sends a negative
signal to international investors about Canada`s automotive policy environment.

JAMA Canada website launched in May

On May 6, 1998, JAMA Canada officially launched its home page on the World Wide Web.
The site can be found at https://www.jama.ca.

The purpose of JAMA Canada`s website is to provide information about the Japanese auto
industry in Canada for industry and government officials, journalists, researchers,
students and anyone interested in news and facts about Japanese automakers` activities.
Focussing specifically on Canada, the site is a complement to the international websites
of JAMA at www.japanauto.com and www.jama.or.jp.

Features of the JAMA Canada site include information and links to JAMA Canada members,
quarterly newsletters and annual reports, statistical data on the industry, investments in
Canada, purchasing contacts in Canada, position papers and briefs, and links to other
sites both automotive and trade related.

The site will be updated regularly. And it will change and evolve as necessary.
Feedback is always welcome.

CAPTIN plans 4th expansion

Following the completion in May of its most recent phase of increased production
including the introduction of new differential pressure casting technology, Canadian
Autoparts Toyota Inc. (CAPTIN), whose plant is located in Delta, British Columbia, is
planning its next expansion which will begin in August 1998. Expected to be completed by
August 1999, this expansion will bring aluminum wheel output to 1.2 million units
annually, or 100,000 per month.

The increase in capacity will require additional investment beyond the current total of
$110 million since start-up, and will bring total employment in the plant to about 200
when fully operational.

CAPTIN was established in 1985, and was Toyota`s first investment in auto parts
production in Canada. CAPTIN makes more than 20 models of aluminum wheels, about
two-thirds of which are exported to Japan. More recently, shipments to plants in the U.S.
and Canada have been growing as Toyota production capacity in North America continues to
increase in both Canada and the U.S.

CAPTIN recently qualified for ISO 14002 and is aiming to be a qualified QS 9000
supplier in the near future.

For More Information Contact:



JAMA Canada

Suite 460, 151 Bloor Street West, Toronto, Ontario, Canada M5S 1S4

Tel: 416-968-0150

FAX: 416-968-7095

Internet: [email protected]