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Kyushu earthquake: Japanese production recovery to take nine months – forecast

20 May 2016 IHS Markit Automotive Expert

Suppliers and OEMs are slowly returning to normal in Japan following the Kyushu earthquake in April, but the struggle to find extra working days is slowing attempts to recover lost volumes.

IHS Automotive Perspective

  • Significance: The aftermath of the Kyushu earthquake is dragging on and the time needed to recover lost production is extending as suppliers and OEMs struggle to find extra working days to make up for the lost time, according to IHS Automotive forecasting.
  • Implications: According to IHS Automotive's latest May forecast scenario, lost volumes will expand to 100,000 units in June without any recovery, and production will only start recovering from July.
  • Outlook: Toyota has already added extra working days in May and June to recover volumes that were lost as a result of the explosion at the Aichi steel plant in January, and it will start additional efforts to recover the production lost because of the Kyushu earthquake from July, with a full recovery not expected until January 2017.

The aftermath of the Kyushu earthquake is dragging on and the time needed to recover lost production is extending as suppliers and OEMs struggle to find extra working days to make up for the lost time, according to IHS Automotive forecasting.

Background

The earthquakes that hit the southern Japanese city of Kumamoto in Kyushu prefecture during April affected a number of suppliers and automakers. Toyota was the most deeply affected, and although the company restarted production operations at all its remaining quake-affected assembly lines in Japan from 6 May, IHS Automotive now expects that it will take until early next year for the automaker to fully recover. Mitsubishi and Nissan were affected briefly by the break in the supply chain. Mitsubishi halted operations at its Mizushima plant from 18 April (night) and 19 April, while Nissan resumed operations at its two Kyushu plants from 18 April. Neither manufacturer was badly hit as their exposure to the affected suppliers was far less than that of Toyota, and their production losses are expected to be recovered in less than one month. Outside Japan, General Motors (GM) has reported that four production plants - Fairfax, Lordstown, Oshawa, and Spring Hill in North America - have been affected by component shortages as a result of the Kumamoto earthquakes.

Supply chain is recovering slowly but surely

Component manufacturer Renesas resumed partial production from 22 April and expects to recover full pre-earthquake production capacity (wafer input capacity) on 22 May. Renesas has announced that it has resumed production for all outsourcing factories, while further damage has been confirmed at some sub-contractor plants. Currently, it is proceeding with recovery efforts to restore pre-earthquake production capacities, and it will be fully restored in June. Fellow supplier Aisin Seiki meanwhile started alternative production on 23 April by carrying manufacturing equipment and moulds out of the plant, and since 2 May it has resumed production for almost all components in other Aisin companies, group plants, and affiliates in Kyushu. In the meantime, Aisin has not yet determined when the Aisin Kyushu plant will resume production.

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Outlook and implications

May scenario of lost volume and its recovery plan: Considering the status of the Japanese automotive supply chain, it is getting more difficult for OEMs to secure additional working days in May and June. According to the latest May scenario, lost volumes will expand to 100,000 units in June without any recovery, and Japanese production will only start recovering from July. It will take until March 2017 to fully recover all the lost volume, which is longer than the pessimistic scenario set out on 25 April. Toyota has already added extra working days in May and June to recover volumes that were lost as a result of the explosion at the Aichi steel plant in January, and it will start additional efforts to recover the production lost because of the Kyushu earthquake from July, with a full recovery not expected until January 2017. In the Toyota Group, the Lexus NX will be the last model to recover, expected in January 2017. Production of Honda mini-commercial models produced at the Yachiyo plant has been stopped since 22 April because of component shortages at the Honda Kumamoto plant. It will take until March 2017 for operations to return to normal as the facilities at the Kumamoto plant were severely damaged.

The impact on domestic sales and overseas production markets: We expect that the joint venture between Nissan and Mitsubishi, NMKV, will lose sales because of the recent events at the latter regarding its fuel efficiency testing, and that other manufacturers such as Daihatsu, Suzuki, and Honda will gain additional sales as a result. Suzuki and Honda are expected to take this opportunity to increase minicar production, but Daihatsu will lose a part of this opportunity because it cannot secure additional working days in May and June, which will result in further opportunities for Suzuki and Honda. Outside of Japan, we have confirmed that only four GM production plants in North America have been affected by the Kyushu earthquake, losing 32,600 units in May and June. We do not see a serious impact on any production sites other than in Japan and North America at this moment.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.

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