Disruptions caused by Japan's March 11 earthquake and tsunami could further encourage Japanese auto parts makers to relocate factories to China - an eventuality already being driven by explosive growth in the Chinese auto market.
Japan's Big Three automakers - Toyota Motor Corporation (NYSE ADR: TM), Honda Motor Co. Ltd. (NYSE ADR: HMC) and Nissan Motor Co. Ltd. (PINK ADR: NSANY) - all already operate assembly plants in China. And while 60% to 70% of the parts those plants need come from within China, the rest must be imported from Japan. So if the assembly plants run out of the parts from Japan, production will halt.
Although no plant in China has yet reached that point - Toyota, Nissan and Honda have all said their factories have enough parts to sustain production for at least two more weeks - the possibility has led some to contemplate a more localized supply chain.
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Disasters Driving Japan Auto Parts Makers to China
Supply Chain Disruptions from Japan Disasters Hit Auto, Electronics Industries
Companies both in Japan and around the world have begun to feel the sting of supply chain disruptions resulting from the catastrophic March 11 earthquake and its aftermath.
In addition to the damage done to factories in northeastern Japan by the quake itself, companies must contend with ruined roads, fuel shortages, and rolling power blackouts. Many companies are not sure when some of their facilities will be able to resume production, creating uncertainty for companies further down the supply chain.
"This is serious and it's still difficult to evaluate," Nissan Motor Co. Ltd. (PINK: NSANY) Chief Executive OfficerCarlos Ghosntold Bloomberg News. "You have the earthquake, you have the tsunami, rolling blackouts, and fuel shortages hitting at the same time, and they aren't only hitting the car manufacturers, but also the suppliers and the dealers."
In addition to the damage done to factories in northeastern Japan by the quake itself, companies must contend with ruined roads, fuel shortages, and rolling power blackouts. Many companies are not sure when some of their facilities will be able to resume production, creating uncertainty for companies further down the supply chain.
"This is serious and it's still difficult to evaluate," Nissan Motor Co. Ltd. (PINK: NSANY) Chief Executive OfficerCarlos Ghosntold Bloomberg News. "You have the earthquake, you have the tsunami, rolling blackouts, and fuel shortages hitting at the same time, and they aren't only hitting the car manufacturers, but also the suppliers and the dealers."