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Customer LoginsEarthquakes halt Japanese automakers' domestic output, with potential impact also on overseas production
After two powerful earthquakes (on 14 and 16 April) hit the southwestern island of Kyushu, key Japanese automakers including Mitsubishi, Nissan, and Toyota have announced domestic production shutdowns owing to component shortages.
IHS Automotive Perspective
- Significance: Two earthquakes in Japan have impacted production of several suppliers and at least three automotive manufacturers: Mitsubishi, Nissan, and Toyota.
- Implications: The issue is causing temporary production halts at plants hit by a disruption in parts supply. For Toyota, output will be affected at least until 23 April, while Mitsubishi and Nissan have not yet announced shutdowns beyond 20 April.
- Outlook: IHS is monitoring the situation and the earthquakes' effects will be included in our next global production forecast update. In the meantime, for Toyota and Nissan, any impact would fall on luxury brands Infiniti and Lexus.
Two earthquakes have hit output at several automakers and suppliers in Japan, interrupting production largely due to a lack of parts, reports Automotive News. Japan's leading automaker, Toyota, including subsidiary Daihatsu, announced yesterday (17 April) plans to suspend domestic vehicle assembly operations at its plants in stages between 18 and 23 April. The automaker will decide when to restart domestic operations according to the availability of parts. Mitsubishi announced plans to halt operations at its Mizushima plant from 18 April (night) and 19 April. Nissan has announced that its two Kyushu plants will resume operations from today (18 April), although IHS Automotive forecasting analyst Satomi Hamada said a parts shortage could temporarily hold up its production going forward.
Toyota's domestic assembly lines are being suspended for the second time this year. In February, the automaker halted work at its factories from 8 February to 13 February following an explosion at a steel plant operated by its affiliate Aichi Steel (see Japan: 1 February 2016: Toyota to halt domestic auto production for a week due to parts shortage). According to the IHS global production forecast, Toyota (excluding joint-ventures) built 39% of its vehicle production in Japan, making the country its single most important vehicle assembly source. North America is its second-largest production location, with 19.5% of total output.
For the Renault/Nissan Alliance, output is more balanced on a global level. IHS data show that 35% of its production was in Europe in 2015, with 24% from North America and only 14% from Japan. For Mitsubishi, the home market delivered 52% of production in 2015, followed by 32% in South Asia.
The earthquakes have forced Aisin Seiki, one of Toyota's key suppliers, to pause production of doors, engines, and other parts at its subsidiary in Kumamoto Prefecture, resulting in a parts shortage. Suppliers hit by the earthquake also include Renesas, a key producer of microchips for controlling onboard vehicle and engine systems. As the situation continues to unfold, IHS has not issued an update to our overall production forecast for 2016, nor are we yet projecting the volume losses these automakers will suffer over the situation. At the time of writing, it is unclear when or if the parts shortage will impact plants in other regions.
Outlook and implications
Japan
Most of the automakers in Japan follow the just-in-time/sequence process for deliveries of components, systems, and modules. Under this system, automakers receive parts according to their production schedules, saving them from building up inventory. After the devastating earthquake and subsequent tsunami in 2011, however, Japanese automakers took steps to make the process more resilient to natural disasters, such as by maintaining supply chain databases. But last week's earthquake has affected suppliers' facilities, disrupting the supply chain. Until suppliers resume deliveries, automakers cannot restart assembly operations. Yet suppliers' ability to resume production depends on several factors, including how severely the earthquakes damaged not only their plants but also those of their tier-two or raw material suppliers.
North America
Toyota
While Toyota-brand production has been significantly localised to North America, the company imports several models. The Toyota 4Runner, Prius, iM (formerly Scion), Land Cruiser, Mirai, and Yaris are shipped from Japan without supplemental North American production. While the RAV4 and Camry are also imported from Japan, most sales volume is from North American production.
For the Toyota brand, 54% of 2015 sales were produced in the United States, 24% in Canada, and less than 2% in Mexico, with 20% in Japan. These ratios are expected to be similar in 2016, according to the latest IHS Automotive production forecast. For the Lexus brand, supply is more closely tied to Japanese production. In 2015, 70% of Lexus's North American sales were imported from Japan, with 29% produced in the United States and the rest in Canada. For 2016 and going forward, that rate is forecast to drop to 55%, as the RX is now single-sourced from a Toyota plant in Canada.
Lexus exports to North America include the NX, CT, ES, GS, GX, IS, LS, LX, and RC. The Lexus ES is produced in the United States as well as Japan, and production of the Lexus RX is single-sourced at Toyota's plant in Canada. Within the Lexus lineup, loss of production of the NX may have the greatest impact on the brand's US sales. The NX is Lexus's third-best-selling vehicle in the United States, behind the Camry and ES, which are both also sourced in North America. The hot-selling luxury compact CUV posted a 24.8% rise in US sales over the first three months of 2016.
For the Toyota brand, vehicles single-sourced from Japan for North American sales include the 4Runner, iM, Land Cruiser, Mirai, Prius family, and the Yaris. Toyota's highest-volume products are sourced in North America, though the high-image Prius is among the most significant imports. Prius sales in the US were down 16.2% year on year in the first quarter, with the new generation slow to gain traction. Sales of the Prius c slipped 33% and the Prius V 24% over the quarter.
Renault/Nissan
Initial reports are that the supplier situation has affected two Nissan plants: its Tochigi and Kyushu facilities. For North America, Kysuhu builds the Nissan Rogue/X-Trail/Qashqai as well as the Infiniti QX and QX80, Nissan Quest, and Nissan Urvan. Later in 2016, the Nissan Armada will also shift from US sourcing to production at Kyushu. The Tochigi plant supplies the Nissan 370Z and GT-R and the Infiniti Q50, Q60, Q70, Q80, QX50, and WX70.
For the Nissan brand, like Toyota, much of its North American supply has been localised. In 2015, only 8.8% of North American sales were sourced from Japan, with 40.5% made in Mexico and 50.7% in the United States. But Nissan had recently begun producing the Rogue at Kyushu for the US market, to supplement its US assembly. US-bound Rogue production - but not shipping - has reportedly begun. For Infiniti, 68% of North American sales were of vehicles imported from Japan, with 32% sourced from the United States. The Infiniti brand's best-selling product in the United States over the first three months of 2016 was the Q50, sourced from Tochigi, followed by the QX60, built in the United States. Infiniti's new QX50, the brand's third-best-selling product, is also sourced from Japan. A reduction in supply from the production shutdown would hit Infiniti's sales channel harder than Nissan's.
Mitsubishi
Mitsubishi has also announced temporary production halts over the earthquake. As the automaker has recently closed its sole North American production source, it is fully reliant on imports to supply its North American sales arm. Mitsubishi has initially said its Mizushima plant has been impacted by the shortage of parts. But this plant produces only the i-MiEV and the Lancer, neither of which has significant sales volumes in North America. Mitsubishi's US sales strategy is focused on the Outlander, the Outlander Sport, and the Mirage compact car.
South Korea
According to a news report in The Korea Economic Daily, the Japanese earthquake may also disrupt South Korean automakers' output. Ssangyong Motor's Tivoli and Tivoli Air crossover sports utility vehicles (SUVs) are fitted with six-speed automatic transmission supplied by Japanese supplier Aishin. "Most of the transmissions supplied to us are manufactured in Nagoya and there is no problem getting supply even though the Kumamoto plant stopped operating. But we are watching the situation closely as it develops," said a Ssangyong official.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.