automotive

Future Hazy For Japanese Vehicles, Motorcycles

Motorcycles

Japanese car and motorcycle makers are saying they are halting production at least through midweek next week because of the disaster in Japan, and the crisis at the Fukushima Daiichi nuclear plant.

It is unclear what this will mean for the U.S. auto, motorcycle and recreational vehicle market, because manufacturers themselves don't know when factories will ramp up operations.

Kelley Blue Book notes that with gas prices on the rise, any interruption to Japan's production capacity could have far-reaching consequences in the United States, including higher prices for Honda, Toyota, Nissan, Subaru, Mazda, and Suzuki vehicles.

Toyota, which will be down at least until March 22, says it has already lost production of 40,000 vehicles. Honda has done likewise while Nissan and Mitsubishi have resumed operations.

Kelley Blue Book says if production is resumed fairly soon, the overall impact to the supply and ultimate price of Japanese vehicles should be relatively minor, even if the downtime lasts two to three weeks. The firm says Japanese automakers are at an average of 61 days-supply of inventory, which is considered average, "so in the short run, it appears as though there are enough vehicles on dealer lots in the United States to withstand a short-term production cutback."

But if shutdowns last a month or longer, supplies of vehicles from Japan could tighten, raising prices. "Perhaps most impacted will be the price of fuel-efficient hybrids and compacts, which already have seen an increase in demand as gas prices have been on the rise," says KBB. The firm says that would cause prices to rise for such vehicles made by Hyundai, Ford, GM and others who would "see increased sales as a result of the reduced supply of Japanese imports."

But there are more questions than answers -- what with power outages, damage to Japanese infrastructure, and the potential for a meltdown at Japan's Fukushima nuclear plant. Kelley Blue Book said it expects incentives for many Japanese vehicles to stay strong, "so now might be a great time to try to get a deal on a Japanese vehicle while there still is sufficient inventory," as a shortfall of Japanese-made vehicles will mean price increases across the market, according to Juan Flores, director of vehicle valuation, Kelley Blue Book.

Meanwhile, although Japan's motorcycle industry may be a much, much smaller sliver of the auto market in the U.S., its problems may be more acute, as few Japanese motorcycles are manufactured here -- and the sector, which is discretionary in the U.S., has been battered by the economy. Also, we are just entering the season when people start heading to motorcycle dealerships.

Fran O'Hagan -- president of Pied Piper Management, which practices market research on different market sectors, including motorcycles -- says it's a bad time for Japanese motorcycle brands to have supply problems, as they have just started seeing improvements. "It's been a used-motorcycle market. Sales stats have been pretty hard to come by and I suppose the reason for that is they show a lot of bad news. If we totaled up year-to-date sales, I'm guessing it's around 50% below where it was three years ago. Even back when times were good in the industry, it was still not easy to earn a good living through motorcycle dealerships. When sales drop by 50%, it makes it impossible."

Among major Japanese motorcycle companies, only Yamaha seems to have avoided serious plant damage. Still, the company says it is halting production until around March 23 at five factories that make outboard boat motors, personal water craft, auto engines, and ATV and golf car engines. Honda says it has shut down production at six plants through March 20, including the motorcycle-producing Kumamoto Factory. Honda has also shuttered its motorcycle production facilities in America.

Suzuki says it has stopped manufacturing at six plants, including the Takatsuka and Toyokawa facilities. The former makes motorcycle engines, and the latter makes and assembles the motorcycles. Officially, Suzuki says it is extending the delay at least through March 17.

Kawasaki said its Akashi plant is 400 miles southwest of Sendai, which is near the quake's epicenter. "Fortunately, the Akashi/Kobe area where Kawasaki offices and factory are located did not experience any direct effects from the earthquake," said a company release.

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