IE 11 is not supported. For an optimal experience visit our site on another browser.

Quake could trigger wide auto price hikes

After the Japan disaster, American motorists who have an eye on a new Japanese car, truck or crossover may need to stretch their budget a bit more than anticipated.
Image: The wreckage of a car from the March 11
The wreckage of a car from the March 11 earthquake and tsunami lies upsidedown at a service station of Japanese auto giant Nissan. Supply shortages and damaged factories are likely to mean higher costs for American motorists who have an eye on a new Japanese car, truck or crossover.TORU YAMANAKA / AFP - Getty Images

There are some tentative signs that the Japanese auto industry is slowly coming back to life after the deadly earthquake and tsunami that struck the country March 11. But American  consumers should brace for the likelihood that they will pay more for vehicles with Japanese nameplates in the months to come.

Nissan and Mitsubishi expect to have at least some of their factories back in operation this week, though industry officials warn that plans could change rapidly in the days and weeks ahead, reflecting ongoing uncertainty about factors as basic as communications and transportation.

Most Japanese auto plants remained idle 10 days after the disaster, at least in part because of the crisis at the Fukushima Dai-ichi nuclear complex and nationwide power shortage it has provoked.

The crisis has reached across the Pacific, with Japanese-made automotive parts in increasingly short supply. Several carmakers, including Toyota and Subaru, have curbed production at their North American “transplant” assembly lines, while General Motors’ assembly plant in Shreveport, La., is down for the week due to a shortage of Japanese-made parts. GM also is halting production at its Tonawanda Engine Plant, near Buffalo, and laying off 59 of 623 workers.

“The impact of this [crisis] has yet to unfold,” said Mark Reuss, president of GM’s North American operations, adding that the ripple effects of having Japanese auto suppliers close down — or their delivery pipelines disrupted — could be “bigger than anyone knows today.”

Deutsche Bank automotive analyst Rod Lache said it is “still too early to estimate the impact to the supply chain, or how long energy preservation measures (such as the rolling blackouts felt across much of Japan) could potentially limit production.”

But a report from IHS Global Insight contends that every major automaker will eventually be affected by the Japanese disaster and subsequent shortage of parts, probably by mid- to late April.

"It is not a matter of if, but when," said Michael Robinet, director of automotive forecasting.

So far the impact of the disaster varies widely by carmaker and supplier. Nissan and Toyota have a number of facilities based in northeast Japan, the region hit hardest by the disaster. On the other hand, Suzuki’s facilities are based south of the nation “and did not suffer any meaningfully direct impact,” said Kurt Sanger of Deutsche Bank.

But parts shortages and the power situation are wild cards that threaten all Japanese automakers.

Sanger said Nissan has between four and six weeks of imported parts for its North American plants, but he warned that Honda could face trouble as it gets ready to launch the all-new 2012 Civic if the supply line isn’t reopened by sometime in May.

Honda has announced it will delay taking some U.S. dealer orders because of delays in production.

For its part, Toyota has said it’s “making every effort to minimize any long-term impact on Prius availability.” But the timing of the crisis is especially bad for the world’s top automaker, as it prepares to launch several additional hybrid models that will share the Prius name as part of a new brand-within-a-brand.

With a key engine plant possibly out of commission for an extended period, Nissan is considering the possibility of shifting some production to a powertrain plant in the U.S. It could wind up shipping engines back to Japan once home market assembly plants resume operations.

American motorists who have an eye on a new Japanese car, truck or crossover may need to stretch their budget a bit more than anticipated.

A number of online services that track automotive pricing report that Asian makers and their dealers are already beginning to curb incentives and even raise prices in the wake of the crisis.

Darren Shuster, of, said Toyota prices increased immediately after the earthquake.

Japanese carmakers and dealers are also eliminating the rebates and other incentives they were offering prior to the Japanese natural disaster, according to Jesse Toprak, vice president of industry trends and insight at The impact, he warned, could last “weeks, if not months.”

Nissan was expecting to restart a number of component plants on Monday and bring up at least some of its assembly lines by mid-week. A senior Nissan official said the automaker is “tracking the situation hour by hour, part by part.”

The disaster at the Fukushima nuclear plant complicates an already serious crisis for the auto industry.

The loss of the facility’s six atomic reactors is causing a headache for Japanese manufacturers, from steel producers to silicon chip makers, who are facing the nightmare of rolling blackouts.  Several automakers have reported suffering serious damage to casting equipment when molten metals briefly cooled during the blackouts.

Meanwhile, as the damaged reactors continue to leak radiation, there is growing concern not only about the impact on Japanese water and food, but also on the country’s manufactured goods.

"We do not believe there is any harmful radiation risk,” said Dave Reuter, vice president of communications for Nissan’s North American operations, but “should any radioactive material adhere to our cars or trucks we will take all necessary precautions to ensure harmful material is not brought into the country and transferred to partners, including customers.”

The crisis facing Japanese automakers comes at a bad time for American motorists — as  automotive demand typically peaks in the spring. Even if the current crisis proves short-lived, Japanese carmakers may try to use the situation as an opportunity to push up prices, hoping to counter the impact of the increasingly strong yen.

Strong competitive pressure from U.S., Korean and European automakers could force Japan’s automakers to rethink that strategy. But then again, the entire industry might see this as an opportunity to boost prices, something that was difficult to do during the recession, when even the most lavish incentives failed to bring car buyers back into showrooms.