Citi: Best of Times, Worst of Times — How K-Shaped Polarization Is Reshaping Japan's Auto Market
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Citi's June 2026 report details a K-shaped polarization in Japan's automobile market, driven by widening disparities in household purchasing power. Between 2015 and 2025, average monthly spending on new cars by low-income households (earning under JPY 2 million annually) dropped 22%, while spending by high-income households (over JPY 20 million) surged 32%. This economic divide has expanded the vehicle ownership gap from 27 percentage points in 2019 to 30 points in 2025.
Overall car ownership declined from 80% to 72% over the same period, yet the structural shift is most pronounced in market segments. Low-priced vehicles (under JPY 1 million) doubled their share from 1% in 2017 to 6% in 2025, while high-priced cars (over JPY 5 million) grew from 6% to 15%. Consequently, the mainstream JPY 1–2 million category plummeted from 46% to 19%. As ownership becomes less affordable—exacerbated by a 5% drop in real disposable income since 2020—demand is shifting toward car-sharing services.
This polarization directly impacts manufacturer profitability. Toyota (7203.JP, Outperform, JPY 4,200 target) and Suzuki (7269.JP, Outperform, JPY 2,550 target) boast the highest domestic operating margins at 11% and 9%, respectively, due to their broad exposure across both budget and premium segments. Conversely, automakers heavily reliant on the contracting mid-market face severe headwinds. Honda (Market-Perform, JPY 1,300 target), Nissan (Underperform, JPY 350 target), Mazda (Underperform, JPY 1,000 target), and Subaru (Underperform, JPY 2,350 target) all exhibit depressed or negative domestic margins, reflecting their vulnerability to these structural market shifts.
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