Buyers are paying an extra $1,800 for the Toyota Prius, one analyst reports.
It’s only a matter of time until the global auto industry feels the full shock of the Japanese auto industry shutdown, according to a new study. But the impact is already spreading, General Motors cutting production at a second U.S. plant due to a shortage of Japanese-made parts, while Honda tells U.S. dealers it may not be able to fill their orders due to production delays.
There are already signs that prices are going up on Japanese-badged vehicles, and some of the most high-demand models, such as the Toyota Prius, could be impacted most severely should the situation continue for more than a few weeks, analysts and industry insiders warn.
Meanwhile, in their struggle to re-start home market production, some makers may turn to foreign sources for traditionally Japanese-made parts. Nissan, in particular, is considering the need to ship engines produced in Tennessee back to Japan for use on some of its assembly lines.
“It is not a matter of if, but when,” warned Michael Robinet, chief of auto research IHS Global Insight, before the near-complete shutdown of the Japanese auto industry is felt by every major automaker worldwide.
The problem is that most makers depend upon at least some Japanese-made components, notably including onboard electronic chips used in systems such as engine controllers, safety hardware on infotainment systems.
The impact is already being felt in Japan where even those assembly plants that survived the March 11 earthquake and tsunami without damage have run out of at least some key components. Shortages are already beginning to be felt abroad. Subaru and Toyota have trimmed back production at their U.S. operations. And as of today two General Motors factories are being impacted.
The U.S. maker will halt some production at the Tonawanda Engine Plant, near Buffalo, NY, idling 59 workers in the process. Those engines normally would be needed by the Shreveport Assembly Plant, in Louisiana, but that facility has been idled for at least a week due to the shortage of Japanese parts.
Meanwhile, a report from Deutsche Bank suggested that Honda’s American assembly lines could run out of parts for its new Civic within a little more than a month. Other Japanese “transplant” assembly plants, say industry sources, could be idled even before then.
According to the IHS report, Japanese makers will have lost about 335,000 units of production by the end of the week, and 450,000 by the end of March if the shutdown continues.
Some makers, notably Mitsubishi, Toyota and Nissan, are slowly beginning to ramp production back up. But how fast remains a question that company officials admit they cannot answer. Part of the problem is that key communications channels were disrupted by the Japanese natural disaster. Roads and rail lines have been severely damaged. And the loss of the Fukushima nuclear plant has left the country short of power and forced to resort to rolling blackouts.
Some Japanese producers cannot start back up until they are assured of energy supplies. That’s particularly true for semiconductor producers and metal plants that have to maintain steady, high temperatures.
Honda has told dealers it may not be able to meet their new car orders. Toyota and a number of other makers have begun raising prices, according to various industry sources. Dealers are also curbing incentives. In all, TrueCar.com analyst Jesse Toprak estimates the average transaction price paid for a new Toyota Prius has risen as much as $1,800 since the crisis began.
Though parts shortages could create problems for U.S. and European makers, the situation shouldn’t be nearly as serious as for their Japanese rivals, analysts anticipate. That could put Japanese marques in a serious bind.
Squeezed by shortages – and by the strong yen – they will likely press for price hikes. But that could send customers looking for alternatives at a time when there are more solid competitors than there have been in years.
“If the supply of imported Japanese fuel-efficient vehicles cannot be restored quickly, an opportunity may arise for well-placed competitors to start stealing U.S. market share from Japanese automakers,” said Aaron Bragman, an analyst with IHS.