These conditions dealt a severe blow to the automobile industry. Domestic passenger car sales for 1974 were 23.7% lower than for the previous year, and truck sales were down 22.9%. The sale of midget cars, whose price differences with small passenger cars had narrowed, was particularly hard hit, leading Honda (in 1974) and Toyo Kogyo (in 1977) to discontinue their midget car production. And despite a 26.7% increase in automobile exports over the 1973 level (with truck exports to the Middle East rising 44.3%), total motor vehicle production in 1974 plunged 12.1% from the previous year.

Japan, however, was able to overcome the impact of the oil crisis through strict cost reduction measures, energy and resource conservation initiatives, and unflagging export promotion efforts in a harsh economic climate worldwide.

Responding to the Need for Greater Fuel Efficiency
The oil crisis woke up the nation to the urgency of conserving energy, which became national policy. In addition to developing automotive technologies to cope with the world's strictest exhaust emissions regulations, manufacturers now had to find ways of squeezing maximum mileage out of each drop of gasoline.

Lighter vehicle weight is one factor contributing to increased fuel efficiency. An obvious way to decrease weight is to reduce vehicle size, but this was not much of an option for Japanese manufacturers who had been producing small cars for decades, unlike U.S. and European manufacturers. One weight-reducing solution was the adoption of the front-wheel drive system; another was the use of lighter parts and materials, such as high-tension steel sheeting, aluminum, and plastics.

Additional measures to increase fuel efficiency were the introduction of electronically controlled fuel injection systems, reduced air resistance, and the use of new-technology materials such as fiber-reinforced metals, fiber-reinforced plastics, and ceramics.

The Maturing Domestic Market
Motor vehicle sales in Japan recovered in 1975 and, despite two lackluster years in the late '70s, grew steadily thereafter, although certainly not at the very rapid pace of the previous decade.

While some other countries' domestic markets remained sluggish, Japan's demand for automobiles grew after 1975 largely because of the response of manufacturers to a shift in user needs. Mini vehicles enjoyed a new popularity as a result of changing requirements and an increase in female users, and ownership in rural areas, which had risen sharply in the early 1970s, continued its rapid growth.

Shifts in User Profiles
Between 1975 and 1985, passenger car ownership in Japan grew steadily to achieve a rate of 65.8% in March 1985, or two cars for every three households. Agricultural households had the highest rate of ownership (73%) by 1985, followed by non-agricultural, self-employed households (69.3%) and employee households (67.5%).

This decade was marked by the rise of multiple ownership, which increased threefold over 10 years from 4.7% in 1975 to 14.6% in 1985, with 60% of multiple-ownership households having a second car for use by a female driver. Since 1979, women were outnumbering men in the new driver (first-time driver's license recipient) category.

Small Cars Drive the Market
Between 1975 and 1985, the competition between small passenger cars and popularly-priced mini vehicles was the driving force behind new product development and market expansion. Small passenger car sales took the lead in the aftermath of the oil crisis, because new models were developed that complied with the government's strict exhaust emissions regulations and were also very competitively priced.

From around 1980, however, mini vehicles began to edge out over small passenger cars in the domestic car market. They took a clear lead with the emergence of "female specification" models and the "liter car", a 1000cc passenger car that was smartly designed and very economical. By appealing to young drivers and women drivers, mini vehicles played an important role in expanding passenger car demand.

Product Development from 1975
The mid-1970s saw the emergence of fuel-efficient and economical passenger cars and diesel-engine cars.

In the late 1970s, new high-performance passenger car models appeared on the market that, in addition to complying with exhaust emissions and energy-saving requirements, also responded to increasingly sophisticated user needs.

There was a growing demand for passenger cars equipped with automatic transmission, and high-performance cars with turbo-charger or DOHC engines became popular at this time. Four-wheel drive (4WD) cars, convertibles, and cars with special features such as sunroofs were very much in demand as well.

This same period also marked the introduction of competitively-priced motorcycles designed for "family use" that were highly successful.

Automobile Production's Position in Domestic Industry
In 1976, automobile production became the leading domestic manufacturing industry. The production output for all manufacturing industries that year was \145.359 trillion; of this total, the automobile industry accounted for \12.424 trillion, or 8.6%. In 1978, automobile production exceeded 10% of total output.

The automobile industry is sometimes referred to as "the 10% industry" because it has maintained a 10% share of total manufacturing output, and because 10% of the nation's working population is employed directly or indirectly by the industry.

Further Advances in Production Technologies
Until the early 1960s, special-purpose automatic transfer machinery was introduced into single-model mass production. Thereafter, automation was implemented throughout the production process in a shift to medium- and small-lot production of different models.

The introduction of the Flexible Manufacturing System (FMS) around 1970 played a central role in this transition. Along with computerization and the implementation of other technological innovations in electronics, remarkable progress was achieved in a short period of time. Robot technology also contributed to this progress, becoming firmly established in specific production processes such as spot welding.

Sponsorship of Social Welfare Activities
Around 1965, manufacturers began to contribute to social welfare and public interest activities through the establishment of special foundations.

In December 1973, to commemorate the company's 40th anniversary, Nissan established the Nissan Science Foundation to promote academic research in the natural sciences. In October 1974, Toyota established the Toyota Foundation, with a special research division and an international division, to carry out activities promoting traffic safety, the environment, social welfare, education and culture in Japan and overseas. In 1977 Honda set up the Honda Foundation; in 1980 Suzuki established the Machine Industry Promotion Foundation to commemorate its 60th anniversary; and Mazda established the Mazda Foundation in 1984. The International Traffic Safety Society created by Honda in 1974 also played an active role in promoting the comprehensive study of traffic safety issues.

Sponsorship of Educational, Cultural and Sports Activities
Manufacturers also enthusiastically undertook the sponsorship of cultural and sports activities, both on a local and national level. Hino cosponsored with a newspaper company a scholarship competition beginning in 1968. Nissan launched an amateur baseball competition in 1979, and Toyota inaugurated a nationwide series of community concerts in 1981 to promote amateur orchestras. From 1975 on, events called "kanmuri taikai" (sports events sponsored by business enterprises) were also held on a regular basis.

Manufacturers' overseas activities included the sponsorship of advanced-level Japanese language programs and scholarship programs in different countries around the world.