As Japan continues to reel from the impact and aftermath of the March 11 earthquake and tsunami, the global auto industry, of which Japan is a major player, is going to feel economic aftershocks for month to come. In one plausible, worst-case scenario, 30% of the global automotive industrial output could be impacted, according to IHS Global Insight.
And as the supply of many vehicles goes down, prices will go up. This is especially true of small cars and hybrids, the demand of which was rising due to increasing gas prices.
The plants of Toyota, Honda, Nissan and other Japanese automakers have remained mostly closed after the March 11 quake. Those that managed to come back online are building cars only with on-hand inventory due to the fact the many Japanese auto suppliers that produce parts for the industry are also shut down. Even then, Japan is still experiencing wide-spread blackouts, so plants won't have the consistent power needed for operations.
Small Cars and Hybrids Prices Going Higher
The plant that makes the Toyota Yaris will stay closed at least through April. Toyota is making its hybrids, including the popular Prius, at half capacity. Eighteen other Toyota plants will remain closed until the middle of April. Honda's production of the Fit, Civic Hybid CRZ, Acura TSX and RL have been interrupted, and dealers have been told not to order the cars. Honda has also slashed production at its U.S. plants by 50% because of parts shortages.
Jess Toprak, vice president of industry analysis at TrueCar.com says that incentives that have been on the Toyota Prius will likely evaporate, and the prices of the other small cars will climb too. "It's supply and demand...the harder something is to get, the higher the price dealers can charge."
The delivery of parts and components from transmissions to semiconductors in Japan is being hampered by the shuttered plants and infrastructure problems. About 13-percent of the global auto industry output has been lost now because of parts shortages, said Michael Robinet of IHS. That is approximately like losing the annual output of Toyota or General Motors or Volkswagen.
The worst of the impact has been felt by Japan's own auto industry. But the events in Japan will soon begin to affect car buyers in the U.S., as well as China, Europe and perhaps Korea. Toyota, for example, has estimated that the quake will affect the production of at least 140,000 vehicles or more, while analysts at IHS claims that 30 percent of the global auto industry's volume could be affected within six weeks.
Why so many? A typical car has some 5,000 parts. But if one part is missing or can't be sourced from a second supplier, the asembly line can grind to a halt. Many car companies deliberately source parts from at least two suppliers to protect against a shortage that can stop a factory from turning out vehicles. "But this is unprecedented...something of this scale has literally never happened before in a region that is so vital to so much manufacturing," says TrueCar.com's Toprak.
One of the most important parts to be affected by the disruption to Japan's manufacturing plants and infrastructure is the micro-control-unit (MCU), which controls everything from airbags to fuel systems. There are several needed for any modern vehicle. Renesas Electronics is a leader in producing these controlelrs, handling about one-fifth of the world supply. The company's key plant is in the disaster zone, and isn't projected to be fully functional until the end of this year at the earliest.
It will take time for auto companies relying on the micro-controllers produced by the company to replace them, because automakers spend years integrating the systems of a new automobile. Parts are not easily or quickly replaced without a lot of planning.
Companies Keeping Information Closely Guarded
GM, Ford and Chrysler are experiencing shortages of certain colors of cars because some special pigments come from Japan and can't be replicated. The full impact on auto companies is closely guarded information. But GM, for one, has curtailed spending, everything from employee travel to advertising, in order to conserve cash in case its production is seriously driven down. Companies are working around the clock to replace parts in short supply. And shortages of some specific models won't be divulged until necessary because companies won't want to tip their competition to what models will experience shortages later in the year.
But Here are five examples of vehicles that will soon be in short supply if automakers and suppliers in Japan don't start back up shortly.
Toyota Prius
MSRP: $21,650
If there were ever a time when car buyers will want to consider a Prius, this would be it. Gas prices are approaching $4 per gallon throughout the U.S., which has a way of driving consumers towards more efficient transportation. But plant shutdowns in Japan have led to a short supply of Prius models. For now, because of the shortage, Toyota has removed most incentives for the Prius, bringing the hybrid's for sale price a lot closer to the manufacturer's suggested retail price (MSRP).
Toyota resumed production of the Prius last week, but the company says it will proceed slowly for now to make sure new parts keep coming in. Moreover, the company claims that it has a 32 day supply of the hybrids, which should be enough to keep dealers stocked for a while longer. Still, we don't foresee rebates on the Prius any time soon. And if the rolling blackouts continue much longer, or parts stop flowing into the plants, dealer supplies could dry up quickly.
Honda Fit
MSRP: $15,100
Here's an other very fuel efficient vehicle that has been affected by the Japan earthquake. All U.S. Fit models are produced in Japan, but the plant hasn't been able to make the popular hatchback since the earthquake struck on March 11. To make matters worse, when production resumes the factory will likely be met with further delays as suppliers struggle to get parts making facilities back in business. Honda says it isn't accepting any new Fit orders for the moth of May.
Honda CR-V
MSRP: $21,695
The CR-V is the number-one selling compact crossover in the segment, and Honda's third best selling model. Unlike the Honda Accord and Civic, which can be produced in several North American factories, the lion's share of CR-V production happens in the Saitama prefecture in Japan. That means CR-V production has been all stop and no go. Honda says the crossover could make its way back to production soon. But look for shortages in May and June.
Infiniti G
MSRP: $31,400
Infiniti M
MSRP: $45,800
With the exception of the QX56, all Infiniti models are produced in Japan. That means production has been mostly stop with very little go, as supplier issues have meant that Nissan can only temporarily run plants with parts that were already on-hand before the earthquake. That puts the Infiniti in the same boat as many other makes, but the Japanese luxury car maker also lost 1,300 vehicles as they sat in port in Japan when the tsunami struck land. Spokespeople for the company say that the lost production will be made up in the months ahead, but that could mean short-term pain at U.S. Infiniti dealers. Nissan also has an engine plant that is relatively close to the Fukushima nuclear plant, which means the plant won't be producing engines any time soon. The automaker says it is investigating whether the company's Tennessee engine plant can make up any of the lost volume.
Ford, Chrysler and Toyota models with black or red paint
A paint manufacturer that is within the evacuation zone of the Fukushima nuclear plant may be shut down for eight weeks or more. If you're thinking that one downed paint plant shouldn't affect too much, consider this. Ford asked dealers not to order trucks and SUVs in Tuxedo black, and the automaker is limiting orders of three shades of red. Meanwhile, Chrysler will not be able to offer vehicles in 10 different shades for the foreseeable future. The facility makes a pigment that makes paint sparkle, which will affect Toyota models as well.
And as the supply of many vehicles goes down, prices will go up. This is especially true of small cars and hybrids, the demand of which was rising due to increasing gas prices.
The plants of Toyota, Honda, Nissan and other Japanese automakers have remained mostly closed after the March 11 quake. Those that managed to come back online are building cars only with on-hand inventory due to the fact the many Japanese auto suppliers that produce parts for the industry are also shut down. Even then, Japan is still experiencing wide-spread blackouts, so plants won't have the consistent power needed for operations.
Small Cars and Hybrids Prices Going Higher
The plant that makes the Toyota Yaris will stay closed at least through April. Toyota is making its hybrids, including the popular Prius, at half capacity. Eighteen other Toyota plants will remain closed until the middle of April. Honda's production of the Fit, Civic Hybid CRZ, Acura TSX and RL have been interrupted, and dealers have been told not to order the cars. Honda has also slashed production at its U.S. plants by 50% because of parts shortages.
Jess Toprak, vice president of industry analysis at TrueCar.com says that incentives that have been on the Toyota Prius will likely evaporate, and the prices of the other small cars will climb too. "It's supply and demand...the harder something is to get, the higher the price dealers can charge."
The delivery of parts and components from transmissions to semiconductors in Japan is being hampered by the shuttered plants and infrastructure problems. About 13-percent of the global auto industry output has been lost now because of parts shortages, said Michael Robinet of IHS. That is approximately like losing the annual output of Toyota or General Motors or Volkswagen.
The worst of the impact has been felt by Japan's own auto industry. But the events in Japan will soon begin to affect car buyers in the U.S., as well as China, Europe and perhaps Korea. Toyota, for example, has estimated that the quake will affect the production of at least 140,000 vehicles or more, while analysts at IHS claims that 30 percent of the global auto industry's volume could be affected within six weeks.
Why so many? A typical car has some 5,000 parts. But if one part is missing or can't be sourced from a second supplier, the asembly line can grind to a halt. Many car companies deliberately source parts from at least two suppliers to protect against a shortage that can stop a factory from turning out vehicles. "But this is unprecedented...something of this scale has literally never happened before in a region that is so vital to so much manufacturing," says TrueCar.com's Toprak.
One of the most important parts to be affected by the disruption to Japan's manufacturing plants and infrastructure is the micro-control-unit (MCU), which controls everything from airbags to fuel systems. There are several needed for any modern vehicle. Renesas Electronics is a leader in producing these controlelrs, handling about one-fifth of the world supply. The company's key plant is in the disaster zone, and isn't projected to be fully functional until the end of this year at the earliest.
It will take time for auto companies relying on the micro-controllers produced by the company to replace them, because automakers spend years integrating the systems of a new automobile. Parts are not easily or quickly replaced without a lot of planning.
Companies Keeping Information Closely Guarded
GM, Ford and Chrysler are experiencing shortages of certain colors of cars because some special pigments come from Japan and can't be replicated. The full impact on auto companies is closely guarded information. But GM, for one, has curtailed spending, everything from employee travel to advertising, in order to conserve cash in case its production is seriously driven down. Companies are working around the clock to replace parts in short supply. And shortages of some specific models won't be divulged until necessary because companies won't want to tip their competition to what models will experience shortages later in the year.
But Here are five examples of vehicles that will soon be in short supply if automakers and suppliers in Japan don't start back up shortly.
Toyota Prius
MSRP: $21,650
If there were ever a time when car buyers will want to consider a Prius, this would be it. Gas prices are approaching $4 per gallon throughout the U.S., which has a way of driving consumers towards more efficient transportation. But plant shutdowns in Japan have led to a short supply of Prius models. For now, because of the shortage, Toyota has removed most incentives for the Prius, bringing the hybrid's for sale price a lot closer to the manufacturer's suggested retail price (MSRP).
Toyota resumed production of the Prius last week, but the company says it will proceed slowly for now to make sure new parts keep coming in. Moreover, the company claims that it has a 32 day supply of the hybrids, which should be enough to keep dealers stocked for a while longer. Still, we don't foresee rebates on the Prius any time soon. And if the rolling blackouts continue much longer, or parts stop flowing into the plants, dealer supplies could dry up quickly.
Honda Fit
MSRP: $15,100
Here's an other very fuel efficient vehicle that has been affected by the Japan earthquake. All U.S. Fit models are produced in Japan, but the plant hasn't been able to make the popular hatchback since the earthquake struck on March 11. To make matters worse, when production resumes the factory will likely be met with further delays as suppliers struggle to get parts making facilities back in business. Honda says it isn't accepting any new Fit orders for the moth of May.
Honda CR-V
MSRP: $21,695
The CR-V is the number-one selling compact crossover in the segment, and Honda's third best selling model. Unlike the Honda Accord and Civic, which can be produced in several North American factories, the lion's share of CR-V production happens in the Saitama prefecture in Japan. That means CR-V production has been all stop and no go. Honda says the crossover could make its way back to production soon. But look for shortages in May and June.
Infiniti G
MSRP: $31,400
Infiniti M
MSRP: $45,800
With the exception of the QX56, all Infiniti models are produced in Japan. That means production has been mostly stop with very little go, as supplier issues have meant that Nissan can only temporarily run plants with parts that were already on-hand before the earthquake. That puts the Infiniti in the same boat as many other makes, but the Japanese luxury car maker also lost 1,300 vehicles as they sat in port in Japan when the tsunami struck land. Spokespeople for the company say that the lost production will be made up in the months ahead, but that could mean short-term pain at U.S. Infiniti dealers. Nissan also has an engine plant that is relatively close to the Fukushima nuclear plant, which means the plant won't be producing engines any time soon. The automaker says it is investigating whether the company's Tennessee engine plant can make up any of the lost volume.
Ford, Chrysler and Toyota models with black or red paint
A paint manufacturer that is within the evacuation zone of the Fukushima nuclear plant may be shut down for eight weeks or more. If you're thinking that one downed paint plant shouldn't affect too much, consider this. Ford asked dealers not to order trucks and SUVs in Tuxedo black, and the automaker is limiting orders of three shades of red. Meanwhile, Chrysler will not be able to offer vehicles in 10 different shades for the foreseeable future. The facility makes a pigment that makes paint sparkle, which will affect Toyota models as well.
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