Mark David, sales manager of Saratoga Honda, normally gets 115 to 150 new Hondas a month to sell to customers in this upstate New York resort town. But Honda is only giving him 29 new cars and SUVs in August. “It’s not just sketchy; it’s nonexistent,” he said. On the other side of Saratoga Springs, at New Country Ford, which also sells several Japanese brands, salesman Brett Mueller said there are no new models for sale of Toyota Priuses, Subaru Foresters or Imprezas, and Mazdas are in short supply.
The reason for the shortages, of course, is the catastrophic March 11 earthquake and tsunami in Japan that disrupted the supply chains of many Japanese exporters, including automobiles, auto parts and automotive electronics components. The broken supply chains also curtailed domestic U.S. production of Japanese cars because the flow of auto parts dried up.
“In the second quarter, it trimmed U.S. production of Japanese cars by about half a million units,” said George Magliano, senior principal economist in the Americas for economic forecasting firm IHS Automotive. “But this is just a displacement, and it will rebound next year.”
The disaster also curbed production of some models produced by U.S.-based automakers that use Japanese computer chips or paint components that were also in short supply. “There are 20,000 parts in a car, if you count all the nuts and bolts, but if you are missing one of them, you can’t build a car,” said Wade Hoyt, a spokesman for Toyota in the United States.
The shortage of Japanese-made auto parts curtailed the production of various Toyota models at U.S. plants until this summer. “That’s the downside of globalization,” Hoyt said.
Production of eight Toyota models in the United States is back to normal levels, but parts shortages are still hampering production of four other models, including two pickups, an SUV and a Lexus. The company expects production of all 12 models to be back in full swing by September, Hoyt said.
But that still leaves U.S. dealers without incoming supplies of the Toyota Prius, because the hybrid is only made in Japan. The Prius factory was the first Japanese Toyota plant to get back on line after the earthquake toward the end of March, “but not up to 100 percent capacity, so there are some air bubbles in the pipeline,” Hoyt said.
Those “air bubbles” resulted from the disruption of vessel schedules and port calls because the leak of radioactive materials from nuclear plants damaged by the earthquake forced car carriers to avoid certain ports.
The flow of Hondas from Japan to the U.S. is in the same boat, so to speak. The production of Honda vehicles at U.S. plants fell 17.8 percent in the first five months of the year compared to 2010 because of the parts shortages. Exports of Japanese-made Hondas to the U.S. fell 12.4 percent in the same period.
The volume of automobile imports carried by car carriers reflects the damage done to Japan’s auto supply chains. Wallenius Wilhelmsen Logistics, for example, said it experienced only a “minor” year-over-year increase in U.S. auto imports in the first half of 2011.
“The driving force behind hampered growth in this market in the first half of the year is the fallout from the Japan earthquake and its impact on the supply chain, parts, production and delivery,” it said. The Norwegian-Swedish roll-on, roll-off carrier expects to see a partial correction in the second half. “The year will likely end on par with 2010 import figures.”
By contrast, U.S. automobile exports are booming. During the first half of 2011, WWL recorded a 45 percent year-over-year increase in the U.S. auto exports it carried. It said the growth was “mostly due to economic recovery since this time last year when the market was slowly crawling out of the depths of the recession.” WWL is predicting a strong second half, “so that we’ll see a nearly 40 percent increase in (export) volumes over 2010.”
The dwindling of automobile imports this year at the Port of Portland, Ore., one of the West Coast’s two biggest gateways for automobile imports from Asia, also reflects the travails of Japanese producers. Automobile imports of autos through Portland fell 26 percent in the first half of 2011 from a year earlier, to 89,305 units. The full impact of the supply chain disruption hit the port in April, when imports plummeted 54 percent from March, to 10,122 units. Portland’s automobile imports fell to 9,155 in May, before rebounding to 13,067 units in June as Japanese auto production returned to 50 percent of capacity.
“Toyota and Honda continue to remain at lower production levels in Japan, but the good news is that from here on out, they expect to bounce back,” said Josh Thomas, a port spokesman. He noted they expected to have their factories operating at 70 percent of capacity by the end of July, “so with each successive month, we should see increases in volumes.”
The picture is very different on the East Coast, because the major auto ports handle more imports from Europe and U.S.-made exports, in addition to imports from Asia. In Baltimore, one of the East Coast’s two biggest ro-ro hubs, automobile volume increased 17.6 percent year-over-year in the first 11 months of its fiscal year through May. “We’re going to have a pretty strong automobile year,” said Jim White, executive director of the Maryland Port Administration.
Baltimore’s five auto terminals handle imports of Mercedes-Benz, BMW and Smart Cars from Germany. The Mercedes-Benz auto processing facility in Baltimore started processing BMWs as well as its own cars, which drew new imports of 50,000 BMWs last year, a trend continuing this year. It also processes Smart Cars, which Mercedes is now distributing in the United States.
White met recently with BMW and Mercedes executives who said they expect double-digit sales growth in the U.S. this year.
Baltimore handles imports of cars made in Japan by Mitsubishi, Suzuki and Subaru. It handles exports of U.S.-made Toyotas, but not Toyota imports. White said imports of Subarus are up 40 percent year-to-date from last year, despite the earthquake. Imports of other Japanese-made cars declined by “just a little bit, not a lot,” he said.
The Japanese earthquake and the resulting automotive supply chain disruption will backload U.S. sales to the second half of this year, according to Paul Taylor, chief economist of the National Automotive Dealers Association. “It changed the market share among manufacturers. Buyers are substituting what’s ample for what has tight inventory.”
As a result, Taylor is predicting U.S. automobile sales will total 12.9 million units this year, up from 11.6 million last year, despite the falloff in Japanese imports.
The longer Japanese car imports remain depressed by supply chain woes, the greater the sales of cars by U.S.-based manufacturers, because most automobiles imported from Europe are in the luxury category. Only Volkswagen competes in the same price range with popular Japanese models such as the Toyota Camry and the Honda Accord, Taylor said.
When U.S. dealer inventories of Japanese-made cars are replenished this fall, he expects dealers will again resort to offering generous sales incentives because cars no longer will be in tight supply.
After a likely spurt in sales of cars made in Japan this fall, Japanese automobile imports may not grow as they have in the past, Magliano said. “It’s not just the earthquake, because the yen is pretty darn strong and not competitive any more,” he said, “so the Japanese are shifting production of about 500,000 units over here in the next couple of years.”