The aftershocks are subsiding, and the nuclear disaster caused by Japan's massive earthquake may finally be under control. But Japan's huge industrial sector still faces weeks of turmoil that will affect markets throughout the world.
Like other industries, Japan's automotive sector is deeply intertwined with suppliers, distributors, and retailers in dozens of countries. The March 11 Sendai earthquake knocked out a few automotive assembly plants, but it also wrecked numerous parts factories and left Japan with reduced electrical power that's cutting into the nation's manufacturing capability. Japanese automakers, including Toyota, Honda, and Nissan, are still figuring out how extensive the damage is to their supply systems, and a few stalled assembly lines are restarting. But supply problems could get considerably worse as warehouses exhaust their stockpiles of vital parts. "The supply of Japanese vehicles in the United States is likely to diminish in the short term," writes analyst Michael Robinet of forecasting firm IHS Global Insight. "This is starting to drive up prices for certain imported vehicles. The situation is unlikely to return to normalcy any time soon."
In the United States, the Japanese automakers are benefiting from decisions made years ago to build some of their most popular cars here, to lower shipping costs, reduce the uncertainty caused by exchange-rate fluctuations, and earn home-grown credibility with American buyers. But many key parts still come from Japan, as do some of the models that happen to be in growing demand right now. With gas prices up about 50 cents per gallon so far this year, to an average of about $3.52, buyers have once again been trading down to high-mileage compacts and hybrids—many of them imported from Japan. A revival in the economy is also driving up overall sales and rekindling interest in costlier luxury makes, many of them from Japan as well. So the supply crunch caused by the quake comes at the same time that demand is improving, which is why some prices are likely to rise and a few models may become hard to find.
Automakers typically have at least two months' supply of most models at various points in the pipeline, which is why shortages haven't hit dealers yet. But IHS estimates that lost Japanese production totals nearly 350,000 vehicles so far, including some that had been slated for U.S. dealers. With plant shutdowns continuing, those numbers are sure to go higher. IHS also predicts that production cutbacks outside of Japan, which have been minimal so far, will rise exponentially as parts shortages become acute. There's also the unnerving prospect that shipments of imports from Japan could be held up or rejected if customs officials detect unusual levels of radiation.
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Car buyers won't necessarily discover that models they want have vanished from showrooms. But a lower inventory of certain models will make dealers less willing to negotiate and manufacturers less likely to offer rebates or other incentives. So net prices paid by buyers will go up. Certain trim lines or option packages may be unavailable. Some dealers could also exploit fears of a shortage to make vehicles sound more scarce than they are, and enhance their own bargaining position. And while competing American or European models might be an obvious alternative, those prices could drift upward too.
Buyers needn't panic, and those able to put off a purchase until later this year may find it's more of a buyer's market by then. But anybody who needs a car soon should spring into action. "The dust is not going to settle in a few weeks," says Jesse Toprak of car-research site Truecar.com. "It's going to take months. If you need one of the cars that's affected, the sooner, the better."
To figure out which Japanese-made models could end up scarce, I analyzed data on inventory levels, popularity, and overall sales trends. Production of some models, like the Toyota Yaris subcompact, could be disrupted for a while, but high inventory levels and weak demand mean shortages are unlikely. There could be a run, however, on trendier models that get good gas mileage and are already in relatively short supply. Here's how the shutdowns and disruptions are likely to affect models offered by each major Japanese automaker:
Toyota. Lost production so far, according to IHS Global Insight: 154,000.
The Prius hybrid could be one of the first vehicles to face a supply crunch, since one of the three plants that makes its unique rechargeable batteries was damaged in the quake. Toprak of Truecar.com says the average sales price for the high-mileage Prius has already risen by about $1,800, thanks to a spike in demand generated by the rise in gas prices. He predicts that the Prius will soon sell above its list price, a rare occurrence in a market that has severely contracted from sales levels of a few years ago. The Corolla compact sedan and RAV4 crossover are also affected by plant shutdowns in Japan. The Highlander SUV, assembled in Indiana, requires major components shipped from Japan, and since it's popular, inventories are low.
Several models built by Toyota's luxury division, Lexus, are also in short supply. Those include the new HS hybrid sedan, the popular ES and IS sedans, and two SUVs, the LX and GX. Two Scion vehicles, the xB and xD, could also suffer shortages if supply problems drag on, though inventories are healthy for now.
Nissan. Lost production so far: 34,000.
Nissan has said there are no supply problems yet, but if they develop, the first models to be affected could be affordable, efficient vehicles like the Rogue SUV, Juke crossover, and Cube hipstermobile, which are all built in Japan and have relatively low inventory levels at U.S. dealers. Supply of the all-electric Leaf is limited, but that's an unusual low-volume car that's still in the early stages of production, with most deliveries going to buyers who pre-ordered them over the last year. Nissan says 1,500 fresh Leafs are on their way to buyers, though after that, it's not clear whether supplies will flow smoothly.
Nissan's luxury division, Infiniti, also produces several models in Japan that are in relatively short supply here, including the gargantuan QX SUV, the M luxury sedan, the edgy FX crossover, and its smaller cousin, the EX.
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Honda. Lost production so far: 33,000.
Of the Japanese automakers, Honda builds the biggest percentage of cars sold in America at U.S. factories. But it still imports a few popular models that could suffer from the turmoil in Japan. Like the Prius, Honda's Insight hybrid has started to fetch a higher price, and Toprak predicts it could soon be selling close to MSRP. The popular Fit subcompact also comes from Japan, along with some CR-V SUVs, though supplies of those two models seem adequate for now. At Honda's Acura division, the TSX sedan seems most vulnerable to a shortage, followed by the RL sedan.
Mazda. Lost production so far: 33,000.
Every Mazda is made in Japan except for the Mazda6 sedan, which is built in Michigan. The new Mazda5, a smaller and sportier variant of a traditional minivan, is in shortest supply, followed by the CX-7 and CX-9 crossovers.
Suzuki. Lost production so far: 40,000.
Suzuki has less than 1 percent market share in the United States, so buyers would barely notice any supply problems. But its SX4 compact is one likeable car that comes from Japan and could run short if supply problems worsen.
Subaru. Lost production so far: 18,000.
Subaru has been on a roll, with a small but popular lineup of all-wheel drive vehicles that could be impacted by parts shortages. The Forester crossover and Impreza sedan are built in Japan, with a fairly low inventory of cars at U.S. dealers. The Legacy sedan, Outback crossover, and Tribeca SUV are assembled in Indiana—but they're more dependent on parts from Japan than other Japanese cars built in the United States.
Volvo. This Swedish automaker, now owned by a Chinese company, builds its cars in Europe, not Japan. But it's heavily dependent on key Japanese-made components like climate-control systems that were knocked offline by the quake. With certain parts down to just a few days' supply, Volvo is preparing for a production shutdown, according to the New York Times. Volvo is a small part of the U.S. market, but its new S60 sedan has impressed critics, and other models, like the family of XC crossovers and the S70 wagon, are popular with families. There may be no better illustration of the global economy than the prospect of American families unable to get cars built in Europe by a Chinese company because of an earthquake in Japan. Those aftershocks may be diminishing, but they travel a long way.