The business environment in which our group operates
The Market Environment
Our group's main business, the domestic automobile-related business, is linked to the domestic automobile sales market, which is easily affected by the taxation system of consumption tax, automobile acquisition and retention, and other related taxes.
The new car market in Japan peaked at 7 million units in the 1990s and has remained stagnant since then. After the turmoil of The COVID-19 pandemic, new car sales in recent years have remained below 5 million units.
Furthermore, the market is declining in the mid- to long-term due to a decrease in the number of driver's license holders caused by a shrinking population and other factors, as well as changes in automobile ownership patterns.
In addition, the logistics industry is facing the risk of medium- to long-term crude oil price hikes and rising fuel prices due to the yen's rapid depreciation since 2021, These include compliance, the shortage of labor in Japan, especially crew members, the "2024 Logistics Problem" caused by the Work style reform laws and the revision of the Improvement Standards Notification, and the increased burden on companies as wages rise in step with the rise in the consumer price index, we believe that the business environment will continue to be severe.
About the External Environment
Exchange Rate and Consumer Price Index
Although the rapid depreciation of the yen against the U.S. dollar since 2022 has caused fuel prices to rise, our company introduced a fuel surcharge system (FSC) in September 2022, which has made us virtually immune to the effects of fuel price fluctuations.
On the other hand, our company is in the business of exporting used cars, mainly to Malaysia, and the depreciation of the yen has led to strong sales growth because it allows our overseas customers to keep purchase prices down, but since our company conducts transactions in yen, we are largely unaffected by exchange rate fluctuations.
In addition, the consumer price index has been rising since 2022, and we believe that the impact on our company will take the form of higher wages.
Exchange rate (Yen / USD)
Consumer Price Index
About the Total Automotive Market in Japan
Domestic Auto Sales Trends
While production of new vehicles declined, demand for used vehicles expanded as a result of production shutdowns at automobile plants due to the spread of the new coronavirus and production adjustments due to a shortage of semiconductors.
On the other hand, a series of revelations of fraudulent insurance claims by major used car dealers and fraudulent certification testing by automobile manufacturers have shaken confidence in the automobile distribution system.
Before The COVID-19 pandemic, new car sales had been around 5 million units per year, but are now at 4-4.5 million units, and used car sales and registrations had been around 7 million units, but are now around 6.5 million units, a decrease from the previous level, the turmoil in the market is now under control, as automakers have resumed production and used car dealers that had been involved in fraud have been underwritten.
Export Market for Used Cars
Exports of used vehicles to overseas markets have remained strong due to strong demand for Japanese-quality automobiles.
In particular, exports to the UAE and Russia have been growing. Although restrictions on exports to Russia began in August 2023, the export market continues to be active due to the development of export routes via other countries.
Exports to Africa and ASEAN are also growing for other regions. Export volume to Malaysia, a major customer in our group's used car export business, is steadily increasing, and our market share is also expanding.
Automobile Auction Transaction Trends
Transactions at automobile auctions were affected by a decrease in trade-in vehicles due to sluggish sales of new cars in the Corona Disaster following the suspension of new car production and production adjustments, although there was a temporary decline in the number of units exhibited and contracted, the number of units exhibited and contracted is around 7 million and 4.5-5 million, respectively, and the contracting rate has been on the rise in recent years.
In addition, the supply-demand balance tightened due to a temporary drop in the number of units on display, and inquiries from the export market strengthened, resulting in an upward trend in contract unit prices, and active transactions are continuing.
Automobile Distribution Market
The Market Environment (the vehicle transportation business)
What is the Automobile Distribution Market?
The automobile distribution market can be divided into three categories: the new car market, the used car market, and the user market.
The new car market is the market for transporting automobiles manufactured by automobile manufacturers for sale through automobile dealers or for export to foreign countries.
The used car market is the market where automobiles are transported when their owners sell them to used car dealers or buyers, or trade them in the Business Sales Market (the market where automobiles are traded among car dealers, used car dealers, etc.).
The user market is the market for individuals who own automobiles to transport their vehicles to distant locations for moving, etc., or to transport rental, car lease, or car share vehicles for transportation.
Each of these markets also has a need to transport automobiles to change the name of the vehicle (District Land Transport Bureau) or to perform vehicle inspections (maintenance shops).
In addition to the vehicle transportation business in the automobile distribution market, ZERO Group is also engaged in the business of “Pre-Delivery Inspection (PDI)” before delivering new vehicles to customers, the operation of automobile auctions to mediate transactions in the Business Sales Market, the provision of related services, the operation of private automobile fleet management services to provide transportation services for customers, and the export and sale of used vehicles overseas.