Japan Earthquake Will Hurt Toyota Sales, Effect U.S. Automakers Too
Jason Lancaster | Mar 14, 2011 | Comments 12
Update 3-16-2011: Toyota has announced that they will be closing all vehicle production plants in Japan through at least March 22nd, but that replacement parts manufacturer will resume tomorrow. Toyota has also said that they will resume building component parts for production outside Japan by March 21st.
The knee-jerk analysis here is that Toyota has the ability to ship parts at this time but not cars. Mazda’s facilities, for example, are mostly in southern Japan and have not been affected as dramatically as some Toyota facilities. It’s safe to assume that Toyota has the means to begin shipping parts via some alternative ports as soon as possible. However, shipping cars may be another story.
We’ll stay up to date.
—original story starts—
A Saturday Toyota press release reported that almost all of Toyota’s Japan operations have been unaffected by the recent earthquake. However, as a result of the massive disruption to the people of Japan, Toyota will be suspending all plant operations through at least Monday the 14th. Toyota’s press release also noted that (thankfully) there do not seem to be any casualties to Toyota team members – only it must be noted that accurate casualty estimates are still forthcoming.
Toyota’s press release did note, however, that a small number of plants will likely be unable to resume activities immediately and may be out of commission for a few days, weeks, or possibly even longer. These plant shutdowns will have a fairly large effect on Yaris sales according to our sources, as well as most Toyota vehicles exported from Japan (that means Prius, some Corolla, Scion, and almost all of Lexus). Automotive News is reporting that Japanese port closures could effect worldwide auto industry production – even Ford, GM, and Chrysler-Fiat.
While Toyota’s press release would seem to indicate the bulk of Toyota’s production will be unaffected by the recent earthquake, Automotive News and other analysts are reporting that the damage to the Japanese electrical grid, transportation networks, and ports are ultimately the bottleneck in Toyota’s ability to sell many of their small cars as well as nearly the entire Lexus product line.
What’s more, analysts are noting that many U.S. companies are reliant upon Japanese suppliers and exports. Aisin AW CO Ltd., for example, produces transmissions and electric motors for the Ford Escape Hybrid. Mega-suppliers Denso and Takata – both of which are headquartered in Japan – produce air bags, A/C compressors, spark plugs, wiring harnesses, and more for nearly every auto manufacturer on the globe. If Japan’s supplier base is unable to resume production and export quickly, it will likely cause a ripple effect and random parts shortages for every automaker.
The earthquake and subsequent tsunami was in many ways to devastating catastrophies on Japanese automakers. The earthquake has disrupted power and transportation, and the tsunami has ruined thousands of vehicles that were waiting for export.
Thousands of cars waiting for export were ruined by the tsunami, adding insult to injury caused by the earthquake
Toyota’s Japanese plants that have been temporarily closed are:
- Toyota Motor Hokkaido Plant – Produces transmissions and other various driveline parts, mostly for JDM vehicles
- Toyota Motor Tohoku Plant – Produces a variety of electronics
- Central Motor Corporation Miyagi Plant – Produces the Yaris
- Kanto Auto Works Iwate Plant – Produces the Scion xD
Toyota provides an interactive map of production locations in Japan on their website - click the image above to see more detail.
Toyota models whose production will likely be effected:
- Yaris (impact could be significant)
- Corolla
- Prius
- Avalon
- All Scion models (xD especially)
- All Lexus models except the RX
If there is a silver lining in all of this, it may be that Toyota will be able to pull back on incentive spending. With fewer vehicles available and no way to increase production, Toyota will likely reduce or eliminate special offers on models made in Japan. This will hurt Toyota in the short run, but as we have covered previously, vehicle incentives are like drug addiction. If an automaker can reduce incentives that’s a long-term positive.
While the extent of Japan’s earthquake damage is still being measured, the lesson here is that the global auto industry is strongly interconnected. Production problems in Japan will effect companies across the globe – even U.S. automakers.
Filed Under: Auto News
agree 110%! Unreal and unthinkable that something like this happened. I suspect also that there will be a shortage of oil globally because of this tragedy thus increasing prices at the pump already high enough all over. Can’t wait in 2 weeks to get they cycle out getting 35 mpg vs. my tundra 17 mpg. Hate to say it, but it pays to drive a cycle getting twice the gas mileage even though it is a Honda since Toyota doesn’t make cycles and we all know about Hardleys.
Looks like there were some Infinities in there too.
Keep an eye on resale value. I would bet that the less amount of cars coming out because of the shortage will increase the value on the resale side.
mk – Interesting. My initial instinct was that oil prices would fall – less consumption of oil in Japan while they rebuild – but your opinion makes sense too. Hopefully the impact isn’t too great.
Steve H – Good eye man – I found that image with no explanation or copyright, so I have no idea where it’s from other than somewhere in Japan.
Mickey – Very good point. Toyota’s production will be down somewhat, and used cars are already smoking hot in terms of demand and resale. That will make for an expensive summer for some consumers.
I hope you are right and I am wrong on the oil shortage theory thus increasing gas prices even more. Only time will tell. I know personally a small independent gas station owner that has been in business for over 35 years in the same one horse town I am in with only 2 pumps total being E10 and diesel. He keeps an eye via TV daily on gas prices to decide whether to raise or lower pricing and over the past 30+ years, he has yet to figure out the reasoning behind gas prices going up and down so drastically. He only makes 1-2 cents per gallon profit and with the increased merchant fees, etc. using credit cards and cost of upgrading his pumps to meet govt. B.S. standards for which there is no good reason other than the govt. to make more money, he is almost loosing money leaving the gas station open for business. But, it keeps him busy since he is in his 60’s and without the tire/gas/oil change business, he wouldn’t know what to do with himself. He even offers a 4 cents discount per gallon of gas (4 cents cheaper than anyone else out there around) for customers to ONLY use ‘cash’ to pay instead of that darn credit card where his merchant fees, etc. are killing him.
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oil shortage or fear factor, i lean toward speculation and fear regarding oil prices. my friends at Valero say there is no shortage but politics and wall street causing the rise in fuel cost.
this story is truely tragic for the people of japan. furthermore, if you have been watching the stock market, it shows even more that this is absolutely a GLOBAL market. for the last 3 days 41 of 44 of my stocks dropped like a rock. i guess you can say my portfolio has depreciated like a Titan truck. sorry jason, bad reference to your other blog.
this is a disaster of epic proportion. people are staving and dying. the 1989 world series quake and hurricane katrina combined doesnt even come close to this. and jason, i know you dont like anyone to solicit on your site but i would like this one exception. everyone, please donate at http://www.redcross.org for disaster relief for japan. thanks to everyone in advance.
Danny that’s a great organization to donate to. They are always there for any emergency.
I recently read somewhere certain Japan parts for GM cars are haulting production at some plants. Looks like this is not just affecting like you say Toyota, but almost all the mfgs. as well.
MK, GM has shut down production of the Canyon and Colorado trucks being produced in Lousiana due to supply issue of the transmission that is made in Japan. Honda has suspended May orders. GM and Ford is also seeing supply issues of other Japanese made parts. There was also an article out yesterday stating that GM has suspended all unnecessary spending until further notice.
mk – Good point – there’s no rhyme or reason behind oil price changes, but Danny’s point about fear driving prices is a good explanation.
Danny – I’ve got a Tacoma blog, but no Titan blog. 🙂 Also, I don’t mind solicitations so much as I mind spam. If you link to something good (and you have) I’m in.
mk and Danny – I’ll be posting this tomorrow, but Ford is limiting orders on Black and Red F150s because they use a special paint pigment chemical sourced from Japan. It’s hurting every company on some level.
Jason,
that Titan reference was to your March 14th blog on Truck Depreciation and Titan being the biggest loser. just thought it was funny.