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Customer LoginsJapanese production recovers in aftermath of Kumamoto earthquake; IHS forecasts full recovery to take until Q4
Toyota will resume all halted lines after Golden Week holidays, but full recovery of production losses could take until the fourth quarter of 2016.
IHS Automotive Perspective
- Significance: Production is slowly recovering at many affected suppliers and OEMs as it is now clear the long term impact will thankfully be negligible as there was no follow up Tsunami after the two earthquakes of 16 and 18 April.
- Implications: Toyota, the hardest hit of the OEMs, is beginning to recover and has already reopened a number of lines, but following earlier disruptions due to the steel plant disaster, is likely to take until later in 2016 to fully recover lost production.
- Outlook: We have not changed the impact on domestic sales since IHS Automotive's first response on 20 April, when we assumed that supply disruption will be limited until the fourth quarter of 2016 when vehicle demand will grow rapidly before the proposed consumption tax increase in the first quarter of 2017.
The earthquakes that hit the southern Japanese city of Kumamoto, in Kyushu prefecture, will continue to affect operations for a number of months at a number of manufacturers and suppliers, as the situation and short-, medium- and long-term picture becomes clearer. Toyota, the hardest hit of the OEMs, is beginning to recover and has already reopened a number of lines and pledged to resume production on all vehicle assembly lines in Japan after a scheduled holiday between 29 April and 5 May. The reopened lines include two lines at the Tsutsumi plant, where Toyota makes Prius hybrid cars. Lines were also reactivated at Toyota Industries' Nagakusa plant in Obu, Aichi, Toyota Motor East Japan's Higashi Fuji plant in Susono, Shizuoka Prefecture, and Iwate plant in Kanegasaki, Iwate Prefecture. Eighteen of the 26 suspended assembly lines are due to resume production between 25 and 28 April. The lines to be reopened after the Golden Week holiday ending 5 May include Motomachi Plant (line 1 and LFA Works) run by Toyota, and the following run by Toyota-affiliated companies: Toyota Motor Kyushu, Inc. Miyata Plant (lines 1 and 2). Toyota Auto Body Co., Ltd. Inabe Plant (lines 1 and 2). Gifu Auto Body Co., Ltd. Hino Motors, Ltd. Hamura Plant (line 1).
Mitsubishi and Nissan were also affected by the break in supply chain. Mitsubishi halted operations at its Mizushima plant from 18 April (night) and 19 April, whilst Nissan resumed operations at its two Kyushu plants from 18 April. Neither manufacturer was badly hit as their exposure to the affected suppliers was far less than Toyota and production losses are expected to be recovered in less than one month. Outside Japan, General Motors (GM) has reported that four production plants: Fairfax, Lordstown, Oshawa and Spring Hill in North America, have been affected by component shortages as a result of the Kumamoto earthquakes.
Outlook and implications
Supply chain recovering slowly but surely
Aisin Kyushu Co., Ltd. is starting to move its equipment to other production sites within the Aisin group as it will take time to resume production in Kyushu due to the damage sustained. Aisin Kyushu Casting Co., Ltd. is preparing to resume production at its own site as only minor damage was suffered. Renesas announced that it resumed partial production on 22 April but further damage has been confirmed at some subcontractor plants. Renesas is strongly executing its recovery plan including using alternative sourcing from other subcontractor companies within its supply chain.
The latest scenario of lost volume and its recovery plan
IHS Automotive confirms that major vehicle production plants have gradually started to resume operations from 25 April. Given this, we expect the overall lost volume to reach 94,000 units at a peak in April, which sits between the Base and Pessimistic scenarios, outlined in our first report on 20 April.
As of 25 April, we are still unsure how many working days per month Toyota can additionally secure to recover volume lost to the Kumamoto earthquake; the company has already added additional days to the schedule to recover volumes lost in the first quarter of the year due to the explosion at the Aichi steel plant in January. Considering this uncertainty, we maintain two scenarios: base and pessimistic, depending on the additional working days secured from May. In the base scenario, we expect Toyota to secure two additional working days from May and to recover all lost volume by October. In the pessimistic scenario, Toyota can only secure one additional working day, which would delay the recovery until January 2017. IHS Automotive will continue to track the situation over the next two weeks to reflect the impact in the May forecast update.
The impact on domestic sales and overseas production markets
We have not changed the impact on domestic sales since 20 April. At that point, we assumed that supply disruption will be limited until the fourth quarter of 2016 when vehicle demand will grow rapidly before the proposed consumption tax increase in the first quarter of 2017. Full-year 2016 sales are forecast to grow marginally, by 0.2% to 4.95 million units. We also consider the lost volume at Mitsubishi and Nissan due to the stop-sell affecting their minicars as a result of the misstating of fuel economy figures. This will give other manufacturers of minicars a potential opportunity, but Toyota;s Daihatsu division will not be able to respond due to the impact of the earthquake.
GM has reported that four production plants: Fairfax, Lordstown, Oshawa and Spring Hill in North America, have been affected by component shortages as a result of the earthquakes. Production operations were stopped on 25 April for two weeks, resuming from 9 May. We expect GM will lose 32,600 units in those two weeks but given the available capacity and product cadence, we expect this volume to be easily recovered during the balance of 2016. At this stage this is the only overseas disruption that we have seen.
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.