Following the recent tragic events in Japan, there is going to be a metaphorical aftershock affecting that country’s auto industry, which could send prices higher around the world. Companies like Honda, Nissan and Toyota will struggle to meet demand. Therefore the economic law of limited supply will make it more expensive. And this applies especially to the Toyota Prius hybrid.
Right now, Toyota describes its current Stateside inventory as “adequate” and has said that it is “making every effort to minimize any long-term impact on Prius availability.” This is coming at a time when gasoline prices are rising dramatically and more buyers are looking for fuel-efficient cars.
Although Toyota makes many of its North American-market vehicles in the United States using 70 percent of components from local sources, that still means 30 percent coming from elsewhere. A production line can be held up by the lack of one little part.
Toyota and other carmakers also use a “just in time” system, where parts are delivered on site at the precise moment they are needed. This relies on a finely synchronized ballet between suppliers, haulage contractors and workers at the best of times. For Japan, this is pretty much the worst of times, with vast sections of the country’s infrastructure disrupted, including rolling blackouts because of power shortages due to stricken nuclear reactors. And the Prius is made solely in Japan, along with Scion and Lexus vehicles.
Even if car factories are open, several of the many suppliers may be affected. Usually there are three facilities that supply battery packs for Toyota’s hybrid vehicles. One is closed at the moment. A Nissan engine plant is still experiencing aftershocks. Immediately after the March 11 quake, Toyota shut down operations. As did Honda, Mazda, Suzuki, Mitsubishi, Subaru, Nissan and the Bridgestone tire company. Most of them plan to re-open around March 22. In all, there are 49 models made solely in Japan including 15 Toyota/Lexus/Scion models like FJ Cruiser, 4Runner and Lexus LX570. Mazda’s Mazda3, 2 and 5 and the Miata MX5, Subaru’s Forester and Impreza, and Nissan’s 370Z, Murano, Juke and Leaf, and Honda’s CR-Z and Fit are also on the Japan-only list.
“What we don’t know is how dealers will react,” said Juan Flores, director of vehicle valuation at Kelley Blue Book. “They need a diverse inventory to bring customers in. There might be slight increases, but we don’t anticipate any significant upward pressure on prices for the next 30 days.”
That’s because some cars are still in U.S. ports, awaiting delivery to dealerships. And factor in those already en route, having left Japan before the quake and subsequent tsunami struck. Once this supply has gone, we will have to see how quickly it can be replenished. But if this situation persists and manufacturers cannot return to a normal production schedule “it’s safe to assume that transaction prices will increase,” said Flores. “The dealers will dictate when and by how much. The Prius will be the canary.”
However, Flores noted that the 2011 Prius and 2011 Honda Civic are both currently being offered with favorable lease deals. “These promotions might have been put in before March 11,” he said. But the message is clear: don’t waste time if you want to buy a hybrid or other fuel-efficient car. And this isn’t just limited to Japanese cars. Japan supplies 60 percent of the world’s silicon, the stuff that goes in microchips – which go in cars, computers, phones, and all sorts of other products made and sold around the world.