Will the disaster in Japan cause new car prices to rise?

As every day goes by, the extent of the damage caused by this month’s earthquake and the resulting tsunami in Japan continues to worsen. And beyond the human loss and tragedy, it looks like the return to “normal” for Japanese automakers—and the global industry as a whole—is still up in the air and a long way away.

As you may know, many of the auto plants in Japan are still not functioning or at full capacity. Toyota plans to shutdown its North American plants, General Motors and France's Peugeot/Citroën have announced production stoppages, and the German automakers are worried that shortages in electronic components from Japanese parts suppliers will cause them to stop making cars as well.

While automakers in Japan have started making parts and some cars again, the ripple effect of the loss of several auto part suppliers in that country is causing grief with automakers—and perhaps new car buyers—around the world.

According to a report by the U.S business information firm IHS Automotive published in a Detroit News article, a “prolonged disruption” in the global auto parts supply chain could cut worldwide auto output by as much as 35 per cent, The report assumes a disruption lasting 12 weeks, or the loss of 5 million vehicles worldwide in the production pipeline.

If you already smell a classic case of a supply and demand—where less new cars on dealer lots will lead to a rise in prices—get in line.

Wary of returning to the days when too many unsold cars sat on dealer lots, automakers have become very good at keeping dealer inventories razor thin. Any new model that has more than 60 days of inventory has become a “bad” thing. Now add to this scenario that we are heading into the traditionally strong Spring selling season here in Canada, and it’s hard not to see how some popular new car models will be hard to come by or will have less purchase incentives (i.e. low financing or cash back discounts.)

The result? Like renewing your mortgage or trying to decide when to fill up your car with gas depending on the day of the week, buying a new car has just become a game of speculation.

If you were thinking of buying a new car over the next few months, will this news prompt you to move up your purchase date before the speculated rise in new car prices?

Or will you wait to see if these concerns are even warranted?

[Source: The Detroit News]

 

Comments

[Carlos Marques]

Nice theory: "We have less cars so you pay more if you want one." I think the OPPOSITE will happen actually. I think dealers will have to work hard to sell me an expensive Japanese car with the wrong colour and options, with no $ incentives, with expensive/few spare parts, and no resell value due to "radiation" fears and brake failures. And, like most people, I can always just wait and buy in 6 months, or buy American or Korean if the price difference is that big.

Cheers

[RP]

The Koreans are happy. They've got some pretty nice sheet metal coming out of there these days.