Japan has extended by three years its tax breaks for fuel-efficient cars, in an effort to sustain the national auto industry, severely affected by the natural disasters that struck Japan and Thailand this year.
Initially scheduled to expire in April 2012, the tax breaks were extended until April 2015.
The reason for the decision is that Japan’s car industry, despite holding a significant market share on a global level, has struggled on the domestic market during the last few years. Fuel-efficient vehicles offered however new hopes to car makers, as consumers clearly favored the segment.
The March 11 earthquake and tsunami severely disrupted the industry, as Japan’s biggest car makers struggled with huge problems in their supply chains.
The flooding in Thailand, as well as a record-high yen, also affected the industry, forcing car makers to consider moving their production facilities to other destinations.
Toyota, for example, just announced its annual net profit may drop by 54 percent due to the Thailand flooding. It may lose its title as the world’s biggest car maker to General Motors this year, according to industry experts. Toyota said it would only cash in a ¥180 billion ($2.2 billion) net profit in the fiscal year ending in March.