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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
Would You Pay $50,000 for a new Corolla?
A famous political saying of 50 years ago “You’ve never had it so good”* could well apply to today’s new car buyer.
We’ve been doing some homework on ‘value for money’ new cars comparing those manufactured today against those produced a generation ago.
We looked at two popular cars – the Holden Commodore and the Toyota Corolla.
Let’s look at the Corolla first.
In 1985, a Toyota Corolla CSX Hatchback 5-door with 5 speed manual transmission and a 1.6L engine cost a base price of $14,140, excluding delivery costs. Air-conditioning, power steering and front power windows were extra cost options which would have brought the price up to just under $17,000, excluding delivery costs.
Twenty-five years ago, the Holden Commodore was relatively new and was the most popular car of the year. A 1985 Commodore SL VK 3 speed automatic cost $14,815 at the dealership. Add to that the extra costs you had to pay for air-conditioning, 4 wheel disk brakes, power steering and power windows. This brought the price up to just over $18,200 before delivery and registration costs.
Now let’s adjust these 1985 prices, allowing for inflation and calculate them into today’s dollars. The consumer price index has nearly trebled – a factor of 2.615. So this means that in today’s dollars, the Commodore would have cost $47,632 and the then locally produced Corolla Hatchback translates into a staggering $44,324 at today’s prices.
Now let’s look at what hidden extras you get with the modern version that would have cost a motza in 1985 – assuming you could get them.
ANCAP Safety Ratings – the modern car has built-in crash protection; “crushability zones” and front and side airbags. They have anti-skid braking as standard – that hardly existed in 1985, and only on the most expensive cars like Mercedes, and traction control- which did not exist.
Whilst the enormous advances made with vehicle safety are probably the most important, let’s not forget reliability.
The JD Power company in the USA just released its’ latest annual reliability survey – see our report here. It shows a reliability factor of 151, which is the best that the survey has ever reported, and that’s an outstanding 140% improvement on reliability standards on those of 25 years ago.
But let’s put all of that aside and compare just the raw dealer floor prices.
We worked out that our venerable 1985 Toyota Corolla would cost $44,324 in today’s dollars. (Of course, if you add in all the safety features, you’d be looking at well over $50,000 but forget that for a moment.)
So, would you pay $44K for a new Corolla? Of course you wouldn’t – not when you can get a staggering 52% discount!! A new Corolla is just $21,000 – less than half the price of it’s 25 year old equivalent in today’s dollars..
That’s a great deal for a Corolla. Now how does the Holden Commodore fare?
We have an inflated 1985 cost of $47,632 and a brand new Commodore, equipped with airbags, anti-lock braking, traction control, CD player will set you back just $36,990, which is around 30% less than twenty-five years ago.
Just occasionally we have to remind ourselves that it is indeed true – “we have never had it so good!”
* British Prime Minister, Harold McMillan, 1957
New Car Reliability is best ever- says US Survey
JD Power is a highly respected market research company in the USA, and its annual new car reliability survey has garnered much attention over the last 40 years. They have just published their latest survey on new car reliability and customer satisfaction. The vehicle dependability survey took into account more than 43,000 original car owners of vehicles that were three years old and recorded any problems that arose in the past 12 months.
They use a factor of “number of problems per 100 cars”. This year’s results showed an average number of 151 problems per 100 cars which was the best figure ever recorded! There are some surprises on the list – we’ll just look at those cars that are available in Australia (the top car was, in fact, Ford’s US luxury brand, Lincoln).
The second most reliable brand, Lexus is no surprise as it has always performed well, earning just 109 points.
Perhaps more surprisingly (maybe that’s a little unfair as they have done particularly well in recent years) is Jaguar, with a performance figure of 112, well below the industry average.
Above average performers included (in order of reliability):
Porsche 114,
Toyota 122,
Mercedes Benz 128,
Hyundai 132,
Honda 139 and
Ford 140.
Of the brands that will not want this survey published, Mini heads the list with a figure of 221 – that’s more than double the problems experienced by the most reliable brand.
Mini are closely followed by:
Jeep 214,
Land Rover 212,
Volkswagen 191,
Suzuki 190,
Mitsubishi 186,
Nissan 183,
Mazda 181 and
BMW 164.
Kia, Volvo, Subaru and Audi were pretty much line ball with the average.
Topping individual cars was the iconic 2008 Porsche 911 with a score of just 68.
Efforts have been made to get a similar survey conducted in Australia, but it has so far fallen on deaf ears.
The Truth About Biofuels and Human Waste
If you fell for our April Fool’s post with the phoney press release about a Swedish company using urine as a biofuels, you can be forgiven for falling for it. The truth is actually not that far away.
There has been much (genuine!) excitement in the motoring world about biodiesel produced from algae, as this reduces dependency on limited supplies of fossil fuel and looks to a renewable resource. Some microorganisms produce oils within them that are suitable for use as a feedstock for producing biodiesel. These algae, which include the very common Chlorella, are able to use otherwise non-productive land and rather dubious water, which solves the biggest problem with other sources of biofuels: the crops grown for biofuels, such as corn or jatropha, often compete for good soil and water with food crops, which could cause problems for world food supplies. Algae, however, can be grown in open ponds, which can be built on otherwise useless land and can use wastewater or seawater.
And the wastewater in question can be sewage, which really does include human urine. Urine contains urea, which is commonly used as a fertiliser (for example, the old remedy for lemon trees that aren’t doing well is “a gentleman standing in front of it”), and the algae thrive on this, plus the other stuff in sewage. In New Zealand, one company has successfully harvested the algae from a town’s sewage ponds and refined it to produce biodiesel. The result is known as Green Crude™. This process has two major benefits: firstly, it provides a renewable source of biofuels; secondly, it speeds up the process of cleaning up wastewater, solving another problem.
Sweden, the home of our fictitious Løøflirpa (spell it backwards…), is a country that has a strong interest in biofuels – you only have to look at the biodiesel Volvo and Saab models to realise that. A very high proportion of their petrol stations provide biofuel or an ethanol blend, and they have Europe’s largest E85 alternative fuel fleet, thanks to some government incentives. Like our neighbours across the ditch, biofuels are being developed using sewage.
And what about here in Australia? We have our ethanol producers, mostly using by-products of Queensland’s sugar industry. Legislation has limited ethanol blends to E10 (10% ethanol to 90% unleaded petrol) but this is changing – and the Saab 9-3 Ecotec runs on it just fine. And yes, projects to grow and harvest biodiesel are underway – find out more about it here.
P.S.
In case you missed it:
Poisson de Avril – French for April Fool (literally “April Fish”)
Tonto: Spanish for “stupid”
Necio: Spanish for fool
Majkat: Danish equivalent of April Fool (literally “May Cat”)
Dihydrous oxide: H2O
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