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How Japan’s Tragedy Will Impact On The Market

The dreadful earthquake and tsunami in Japan will have an impact on practically every Western nation in some form or other.

 We have been trying to find out how it will impact on the motor trade in Australia and frankly, it is very difficult to be definitive.

We do know that: –

  • Some Japanese vehicle manufacturing plants, including Toyota, Mazda, Nissan and Subaru have ceased operation and will be gradually resuming production during April and May, but only on a limited basis.
  • Whilst many Japanese branded cars are not actually manufactured in Japan, (for example, the only Honda that is fully manufactured in Japan is the Euro), Japan may well be the source of some crucial components.
  • Similarly, even non-Japanese brands may well be dependant on Japan for components. Volkswagen, for example, source air-conditioning units from Japan.

 This means that the shock that Japan experienced may well be felt much more widely than anticipated and some respected analysts predict that as much as 30% of the global automotive industry’s volume could be affected within six weeks.

We have surveyed most of the major manufacturers to get their take on how they may be affected. Understandably, may of them are reluctant to comment, and others are still uncertain and unclear.

Gone are the days when a car company would make the majority of its motor cars. Virtually all manufacturers source from all parts of the world. A typical car has approximately 5000 parts, and if just one part is sourced from Japan and can’t be sourced from elsewhere, then the whole plant could grind to a halt.

It does seem, though, that some notable brands have already suffered some supply problems – particularly with high tech diesel components, for example – but Japanese suppliers have been able to overcome the supply problems and we’ve just been told that diesel engine production is flowing again, much to the relief of manufacturers such as Peugeot, Land Rover and Citroen.

We have been assured by Hyundai and Kia that they have no supply problems and certainly many European brands remain unaffected too. However, Mazda, who have had to shut down all of their factories in Japan, are slowly resuming operations but have a very restricted power supply. This suggests that their highly popular 2 and 3 model small cars will be suffering severe supply problems in the coming months.

Toyota have been hit by supply shortages in its local operation, and have announced that it will halve its output from its car production line in Altona until supply lines improve. They will reassess the situation at the end of June.

Even if a manufacturer is largely unaffected with parts supply, it may be hit in other obscure ways; for example, some European and North American makers are experiencing shortages of certain colours of cars because some special pigments come from Japan and can’t be sourced from elsewhere.

So, what’s the message?

Simply, this is an enormous disaster that is impacting in many more ways than one could possibly anticipate. New car buyers need to be aware that their choices may be restricted. We will certainly be doing our best to keep abreast of developments, availability and pricing, but it is a time of turmoil where patience is paramount.

As a company, we have enormous sympathy for the plight of the millions of people who are suffering in Japan. Should you wish to assist by donating, we suggest you visit the Japan Tsunami Appeal website at www.wspa.org.au/Japan_appeal

or the Red Cross Appeal website at

 www.redcross.org.au/Japan2011.htm

5 comments

  1. used cars shepparton says:

    As the most important car manufacturing country, Japan has been serious affected by the earthquake and tsunami this time. I am sure the price of Japanese car will be increased and stayed for a long time before the price of parts becomes cheaper again.

    April 27th, 2011 at 2:32 pm

  2. Brian says:

    This is a good article and describes the market quite well.
    In my opinion, the further effects of the Japanese situation is that dealers will direct all current vehicles in stock to retail sales, excluding government and fleet sales. They need to do this to maximise profits when stock supply could be only about 40% of normal. Buyers will switch brands from the vehicles they wanted to buy to vehicles that are available and this will shift the market shares dramatically to the brands that have the stock available.
    Due to new car sales being only about 40-50% of normal the brands affected wont be able to trade used cars and therefore used car prices will rapidly increase and especially on stock like Prado, Landcruiser, HiAce etc which will rise. Toyota and Honda appear to be the most affected brands, so second hand Toyota’s in particular will rise in price as current stock sells out.

    April 29th, 2011 at 11:46 am

  3. David Crosweller says:

    My brother’s Subaru Forester’s 2-3 yr old fuel pump has died. Ther is no replacement in Australia and his mechanic suggests a 3 weeks’ wait. I wonder?

    May 1st, 2011 at 4:20 pm

  4. Fred Williams says:

    As a contractor to one of the manufacturers locally producing vehicles in Australia I can advise that there are well less than 2,000 parts for each ‘typical car’.

    Toyota as a local manufacturer has alternative sources of local supply for parts that cannot be obtained from Japan. The real reason for halving local production is simply reduced demand as the current models are runout in preparation for ramp up of next generation models due later this year.

    May 1st, 2011 at 10:58 pm

  5. Elissa Simmons says:

    It’s also worth thinking about the radioactivity of cars and spare parts that were sitting in factories near the nuclear fall out. How will these (if they are radioactive) be cleaned before shipping overseas?

    May 2nd, 2011 at 4:21 pm