Japanese car shortages could drive up prices

As the death toll mounts and Japan continues to cope with the horrific devastation wrought by the recent earthquake and the resulting tsunami, the tragedy's economic impact is and should remain a decidedly secondary consideration for the Japanese and, for that matter, the entire international community. A consideration of how the catastrophe will impact the automotive industry, then, seems particularly meaningless and, relatively speaking, it is - so much so that this transportation reporter, who is partly of Japanese descent, debated whether to write one at all. Car companies, nevertheless, are crucial to Japan's economy and, indeed, they have become an ingrained part of Japan's culture. So perhaps there is some utility in considering how they have been impacted and what effect that may have on their customers here in the United States.

"I offer my prayers to all those who lost their lives ... as well as my sympathy to the survivors and their families," Akio Toyoda, the president of Toyota, Japan's leading automaker, said in a statement. "[W]e will do our utmost toward the realization of recovery."

That realization of recovery will be a long road for Japan and may be as well for Mr. Toyoda's company and its automotive competitors. The quake understandably forced Toyota as well as other Japanese automakers to temporarily halt production. For Toyota alone, only a three-day shutdown meant foregoing the production of some 40,000 cars. As Christine Tierney of The Detroit News put it, "Japan's mighty auto industry is at a standstill".

As for the impact on American car-buyers, according to Edmunds.com Senior Analyst Michelle Krebs, more than two-thirds of Japanese cars sold in the United States are built in the United States - including 79 percent of Hondas, 72 percent of Toyotas, and 65 percent of Nissans - which means those companies' dealers in the U.S. will be "sufficiently stocked to weather a temporary disruption of imported models".

Although the shortages of Japanese cars in North America are not likely to be drastic, Edmunds.com Chief Economist Lacey Plache predicts that there will be an impact on sticker prices.

"I think the most likely outcome is that we will see new car prices rise," says Plache. "[T]here will be shortages on the Japanese cars built in Japan and sold here, thus driving up prices for these cars and putting less pricing pressure on their non-Japan built competitors".

One automotive market segment where supply will likely dwindle is hybrids, whose popularity in the United States is predictably rising along with climbing gas prices. "Japanese hybrids and small cars, with few exceptions, are produced in Japanese plants," explains Jessica Caldwell, director of pricing and industry analysis at Edmunds.com.

Even as they reel from the disaster themselves, all of the major Japanese automakers are donating millions of dollars as well as resources like power generators and other equipment to help with the recovery.

"With life the number-one priority, we want to do all we can to contribute to the relief efforts," Mr. Toyoda said in his statement.

  • Carter Yang

    Carter Yang is a Washington, D.C.-based producer for the CBS Evening News with Scott Pelley. He covers aviation and transportation.