Toyota most affected OEM
The large earthquakes that occurred on 14 and 16 April affecting the southern Japanese city of Kumamoto have disrupted the domestic automotive industry and caused production interruptions at a number of component and OEM manufacturers based in the affected region, with Toyota worst hit. According to official announcements and IHS Automotive research, we expect the situation at suppliers Aisin Seiki and Renesas to be key to how quickly normal operations resume in the industry.
Aisin Seiki produces body and engine components and has three factories in Kumamoto Prefecture; two of these have halted operations because of the aftershocks, and these stoppages mainly affect production at the Toyota Group. The resumption plan is still to be determined, but Aisin is aggressively trying to resume operations and is looking at alternative sourcing from its other plants.
Renesas meanwhile has its Kawajiri plant in Kumamoto city and operations there have stopped since the earthquake hit on 14 April. Semiconductors used in Toyota engine control units (ECUs) are the key product. Renesas will announce a recovery plan tomorrow (21 April).
Toyota most affected
The impact on the supply chain in the Kyushu area is forcing temporary production stoppages at Toyota, Nissan and Mitsubishi. Toyota Group is most affected and it could take more than four months for the company to recover all of its lost volumes. Toyota announced today (20 April) that it expected to resume production at 18 affected assembly lines between 25 and 28 April.
Mitsubishi meanwhile halted operations at its Mizushima plant from 18 April (night) and 19 April. Nissan resumed operations at its two Kyushu plants from 18 April, although IHS Automotive forecasting analyst Satomi Hamada says that a parts shortage could temporarily hold up production. The impact on Nissan and Mitsubishi will not be as great as it is for Toyota as they are less reliant on supplies from Aisin Seiki and Renesas in the Kumamoto area, and they are expected to recover any losses within one month.
Toyota's domestic assembly lines are being suspended for the second time this year. In February, the automaker halted work at its factories from 8 to 13 February following an explosion at a steel plant operated by its affiliate Aichi Steel. According to IHS Automotive global production forecasts, Toyota (excluding joint-ventures) carries out 39% of its vehicle production in Japan, making the country its single most important vehicle assembly source. North America is its second largest production location, with 19.5% of total output.
Most of the automakers in Japan follow a just-in-time/sequence process for deliveries of components, systems and modules. Under this system, automakers receive parts according to their production schedules, saving them from building up inventory. After the devastating earthquake and subsequent tsunami in 2011, however, Japanese automakers took steps to make the process more resilient to natural disasters, such as by maintaining supply-chain databases. However, last week's earthquakes have affected suppliers' facilities, disrupting the supply chain. Until suppliers resume deliveries, automakers cannot restart assembly operations. Yet suppliers' ability to resume production depends on several factors, including how severely the earthquakes damaged not only their plants but also those of their tier two or raw material suppliers.
*Light vehicles only (GVW >6T)
Outlook and implications
The situation remains in flux, so IHS is considering two scenarios: a base scenario and a pessimistic scenario. In the base scenario, we assume that the recovery plans at Aisin Seiki and Renesas support the resumption of vehicle plant operations in the week beginning 25 April. In this scenario, the net loss would be equivalent to 2.1 days in April, which equates to 70,000 units, of which 66,000 units would be lost by Toyota Group across 15 plants. Toyota would need to add approximately three additional working days until June to recover the lost volumes under this scenario.
In the pessimistic scenario, we see the impact on the supply chain running deeper and affecting Toyota plants until the end of the month. In this scenario the net loss could rise to 127,000 units for the group and Toyota would need to operate additional working days through to August to recover. Even in the pessimistic scenario, we expect supply restrictions to be cleared by the third quarter of 2016, enabling domestic sales to grow comfortably in the fourth quarter of 2016 before the consumption tax increase in the first quarter of 2017. Fortunately, there has been no tsunami following these latest earthquakes, so replacement of damaged vehicles will have less of an impact compared with the 2011 earthquake.
Copyright © 2024 S&P Global Inc. All rights reserved.
These materials, including any software, data, processing technology, index data, ratings, credit-related analysis, research, model, software or other application or output described herein, or any part thereof (collectively the “Property”) constitute the proprietary and confidential information of S&P Global Inc its affiliates (each and together “S&P Global”) and/or its third party provider licensors. S&P Global on behalf of itself and its third-party licensors reserves all rights in and to the Property. These materials have been prepared solely for information purposes based upon information generally available to the public and from sources believed to be reliable.
Any copying, reproduction, reverse-engineering, modification, distribution, transmission or disclosure of the Property, in any form or by any means, is strictly prohibited without the prior written consent of S&P Global. The Property shall not be used for any unauthorized or unlawful purposes. S&P Global’s opinions, statements, estimates, projections, quotes and credit-related and other analyses are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security, and there is no obligation on S&P Global to update the foregoing or any other element of the Property. S&P Global may provide index data. Direct investment in an index is not possible. Exposure to an asset class represented by an index is available through investable instruments based on that index. The Property and its composition and content are subject to change without notice.
THE PROPERTY IS PROVIDED ON AN “AS IS” BASIS. NEITHER S&P GLOBAL NOR ANY THIRD PARTY PROVIDERS (TOGETHER, “S&P GLOBAL PARTIES”) MAKE ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE PROPERTY’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE PROPERTY WILL OPERATE IN ANY SOFTWARE OR HARDWARE CONFIGURATION, NOR ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO ITS ACCURACY, AVAILABILITY, COMPLETENESS OR TIMELINESS, OR TO THE RESULTS TO BE OBTAINED FROM THE USE OF THE PROPERTY. S&P GLOBAL PARTIES SHALL NOT IN ANY WAY BE LIABLE TO ANY RECIPIENT FOR ANY INACCURACIES, ERRORS OR OMISSIONS REGARDLESS OF THE CAUSE. Without limiting the foregoing, S&P Global Parties shall have no liability whatsoever to any recipient, whether in contract, in tort (including negligence), under warranty, under statute or otherwise, in respect of any loss or damage suffered by any recipient as a result of or in connection with the Property, or any course of action determined, by it or any third party, whether or not based on or relating to the Property. In no event shall S&P Global be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including without limitation lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Property even if advised of the possibility of such damages. The Property should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions.
The S&P Global logo is a registered trademark of S&P Global, and the trademarks of S&P Global used within this document or materials are protected by international laws. Any other names may be trademarks of their respective owners.
The inclusion of a link to an external website by S&P Global should not be understood to be an endorsement of that website or the website's owners (or their products/services). S&P Global is not responsible for either the content or output of external websites. S&P Global keeps certain activities of its divisions separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain divisions of S&P Global may have information that is not available to other S&P Global divisions. S&P Global has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P Global may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P Global reserves the right to disseminate its opinions and analyses. S&P Global Ratings’ public ratings and analyses are made available on its sites, www.spglobal.com/ratings (free of charge) and www.capitaliq.com (subscription), and may be distributed through other means, including via S&P Global publications and third party redistributors.
