Japan’s earthquake to dampen car production


LAHORE – Manufacturing of different local auto-makers’ variants is likely to slow down as a significant number of auto vendors in Japan, involved in the auto engine and transmission parts business, are unable to resume their production due to massive damage to their plants – by earthquake and Tsunami.
Supply chain of critical high tech parts is likely to be disrupted due to plants closure; however, stocks available with automakers will help avoid complete shut down of auto production worldwide and Pakistan. Three original equipment manufacturing (OEMs), Japan based companies, are dependant on at least high tech engine parts from plants based in Tsunami hit areas and were shut down by authorities.
The high intensity earthquake followed by the soaring waves of Tsunami, last month, caused massive damages to the industrial base of the country, besides taking lives of at least 28,000 people and leaving the country with economic losses, not less than $300 billion. Following the disaster, measures from the Japanese government surged the value of Japanese Yen, which would propel local OEMs to increase prices of their variants.
Sources in auto industry said that over 1,000 plants experienced the adverse impacts of earthquake and Tsunami in Japan and were striving hard to minimise the damage and to recover. They said that some of the plants have resumed their production within a week; however, they are yet to achieve briskness in auto parts production. Production facilities faced massive damages and were terribly short of utilities, imperative to production.
On the other hand, turmoil in the Arab world has raised prices of oil and oil derivatives, which shot up by 25 percent during the last few months. Prices of steel, polypropylene and rubber have seen substantial increment as the US dollar has strengthened against Pak rupee.
When asked about the impact of these problems on local auto industry, industry sources said that production of local auto variants may be delayed and consumers will have to wait a bit longer in getting the possession of their vehicles, as supply chain of some very critical engine and transmission parts from Japan has been disrupted.
They said that, although, localisation of various auto parts have reduced dependence of Pakistan’s auto industry on imported auto parts; however, parts including critical engine and transmission parts are being imported primarily due to non-availability of the same in local markets.
The post disaster situation is critical for auto makers and vendors, as a majority of the auto vending industry depends on Japanese companies for raw material and other supplies.