Earthquakes have consequences, and the 2011 Japanese quake/tsunami affected many things. One affected area was Japanese car sales. Perhaps the hardest hit make is the Toyota Prius, the best-selling hybrid car in the United States. You see, the Prius, unlike many other models, is exclusively built in Japan. Furthermore, the assembly plant is not far from the area worst hit by the effects of the earthquake. Also, a battery plant that is jointly run by Toyota and Panasonic is situated in Sendai, another city hit by the earthquake. The factory in Sendai was damaged.
Then of course there is the question of electricity. Car plants use enormous amounts of power, much of it affected by the shutdown of 11 nuclear reactors and 21 thermal generators, some of which are now back online. Any disruption to the power supplying car plants is bound to slow production.
American-made cars will feel the effect of Japan’s disaster as well, in the form of parts shortages. For instance, although the big Japanese manufacturers all have plants in the U.S., many still rely on imported parts from Japan to assemble cars. Production and shipping were severely disrupted by the earthquake, and recovery has been slow. GM had to shut down a pickup truck plant in Shreveport, La., for lack of parts. At the end of the day, prices rose due to shortages.
Paradoxically, some dealerships that had lots full of cars saw traffic diminish because customers assumed that cars such as the Lexus would suffer a price rise and a shortage. This was not always the case, and some dealerships had to take aggressive actions to move inventory, such as price-cutting sales, active marketing to sales leads and increased advertisements. But for potential Prius buyers, the news is not good. It was not generally known, but there were actually Prius shortages before the earthquake. This was due in part to the rising price of gasoline and a slight improvement in the U.S. economy. Before the earthquake, there was only a 32-day supply of Priuses in the U.S., reflecting a huge year-over-year sales increase of 47% for the first quarter of 2011. The battery plant in Sendai will be a limiting factor: it normally produces 200,000 batteries a year, but that capacity has been crippled, at least temporarily. The higher oil prices rise, the greater will be demand for hybrid vehicles, and the more pain for Toyota. As demand for hybrids increase, so does demand for automotive semiconductors, and guess where they are made?
No doubt about it, earthquakes can be both immediately devastating and also have long-term economic effects.