Correction Appended: Friday, March 18, 2011
It may soon become much harder to get your hands on the wheel of a Prius. The earthquake and tsunami that have caused over 10,000 deaths, swept away whole towns and plunged Japan into a nuclear crisis will have an impact, albeit a much less dire one, on U.S. car buyers as well: the best-selling hybrid car in America could soon be out of stock.
Toyota's Prius, unlike most other vehicles by Japanese carmakers sold in the U.S., is exclusively made in Japan, nearly entirely in a part of country that is just outside the area that was worst hit by the earthquake. The hybrid's main assembly plant, as well as two battery plants, are located 164 miles west of Tokyo. Another key Prius plant, operated by both Toyota and Panasonic and a main supplier of the car's batteries, is located near the earthquake-hit city of Sendai. That factory was damaged. But all of Prius' factories may be affected somewhat. The earthquake shut 11 nuclear power reactors some of which will never come on line again and 21 thermal generators, eliminating nearly 10% of Japan's electrical-power generation. And the Prius' plants are located in the region of the country that may be affected by power outages. "The unknown is electrical power [supply] and that will be touch and go," says a Toyota spokesman.
But even those planning to head to the dealer this spring to buy gas guzzlers or American-made cars could feel aftershocks from the Japanese earthquake. Both Nissan and Honda have plants that have been damaged or shut down by the quake. Toyota's Yaris and several Scion models are also built in the quake region. What's more, American car manufactures say they too are concerned. Many rely on Japanese companies for parts, and it's not clear when production and shipping will resume. On Thursday, GM decided to shut down a plant that builds small pickup trucks in Shreveport, La., because of a parts shortage. "This is an incredibly dynamic situation," said GM North America president Mark Reuss. "You just don't know if you're getting an accurate picture of what's going on in Japan." Even if dealers don't run out of cars, prices are likely to rise.
"Japanese car companies will have less money for incentives and fewer cars," says Lacey Plache, chief economist at car-research firm Edmunds.com. "That puts less pricing pressure on everyone else." For now, Japanese automakers insist most of the vehicles they sell in the U.S. are made there or in Canada or Mexico. In addition, Nissan, Toyota and Honda all have relatively few assembly plants in the quake zone. Toyota says it's too early to tell whether it will face a shortage of Priuses. Kuninori Matsuda, Japan's consul general in Detroit, who keeps tabs on automotive commerce between the U.S. and Japan, says it's unclear which parts suppliers, if any, have been put out of commission. He says Japan's government is committed to getting the economy restarted, but road and rail connections have been completely disrupted.
Prius buyers will be the most impacted. Even before the quake, the hybrid was in tight supply. Rising gas prices and a better economy had driven up sales of the Prius. Toyota has sold 24,174 of the hybrids since January, up 47% from 16,452 in the same period a year ago. At the beginning of March, Toyota had a 32-day supply, or roughly 18,000, of new Priuses on hand in the U.S., according to Autodata. More Priuses were shipped to the U.S. before the earthquake hit, but it's not clear when Japan would be able to send more. The biggest question has to do with batteries. The battery plant outside Sendai is able to produce 200,000 batteries a year. The longer it is not running, the harder it will be for Toyota to restart Prius manufacturing.
Louie Perez, a salesman at Ventura Toyota in Ventura, Calif., says the dealership's inventory of Priuses has dropped as gasoline prices have gone up. "It's just like it was three years ago," he says, adding that he expects the supplies to get even tighter because of the earthquake in Japan. "I haven't heard anything specifically," he says. "But that's what I expect."
One area of growing concern is the supply of automotive semiconductors. According to auto analyst Rod Lache, 22% of car chips are produced in Japan. Hybrids are particularly dependent on semiconductors, which are used, for example, to switch the vehicle from electric to mechanical drive.
The Japanese earthquake is also likely to delay the long-anticipated widespread arrival of Nissan's Leaf in the U.S. The all-electric car was supposed to be available in cities around the country in the next few months. A spokesman for Nissan said a shipment of 600 brand-new all-electric Leafs had set sail for the U.S. prior to the earthquake. But one of the docks Nissan used for exports was swamped by the tsunami and more than 2,300 vehicles were destroyed in a giant bonfire created by ruptured fuel tanks.
Rashad Braddy, a sales associate at Trophy Nissan in Mequite, Texas, near Dallas, says Nissan has said it will soon tell dealerships if it plans to continue to fill orders for Leafs. "We had one, but it's gone," he says.
An earlier version of this story failed to mention that along with the Prius battery plant that is near Sendai, Toyota has two more battery plants that like the production facility is located outside of part of the country that was worst hit by the earthquake.