News from Notch Consulting, Inc.

April 28, 2011

Supply disruptions boosting Korean automakers at expense of Japanese

Filed under: General, Tires — Notch @ 3:51 pm

Though the post-quake situation in Japan remains quite changeable, it appears that the parts disruptions currently plaguing Toyota, Honda, and other Japanese carmakers are benefiting Hyundai, Kia and other Korean vehicle producers, which were largely unaffected by the disaster, Reuters reports.

The magnitude-9.0 earthquake and the tsunami it triggered have disrupted the supply of hundreds of components from Japan’s northeast region, paralysing car production and reversing what had been shaping up to be a firm recovery from the financial crisis for Japanese automakers.

While the supply bottleneck of certain specialty parts such as microcontroller units made by Renesas Electronics Corp has also hit some automakers outside Japan, most of the pain is being inflicted on domestic brands such as Honda, where output remains at half the level planned before the quake. Honda and Toyota Motor have forecast a return to normal production by the end of 2011, but said they do not know how quickly volumes will pick up, making it difficult to assess their earnings for the business year that started this month.

Given the waiting periods that are expected to lengthen over the summer for buyers of Japanese vehicles, there is likely to be some loss of market share to competitors, including not just Koreans but also US and European automakers.

The earthquake has not only splintered the industry’s complex supply chain, but has forced a delay in vehicle launches.
Honda had been scheduled to begin selling a new hybrid station wagon based on the popular Fit subcompact in Japan a week after the quake, while Toyota has also postponed the launch of wagon and minivan versions of the Prius. But an even bigger worry is what the shortage of Japanese cars and the long wait for consumers would do to their market share in key regions such as the United States and China as some car buyers opt to shop at competing brands, one analyst said.

“Frankly, right now there’s no way to know how this will play out in the medium to longer term,” said Takaki Nakanishi, an auto analyst at Merrill Lynch Japan Securities. “While supply is tight through the summer, some sales will shift to other brands such as Hyundai. We’ll only start to get a sense of whether this trend is temporary or not towards the end of the year.”

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