Japan earthquake rattles carmakers in China

Published: 25/03/2011 05:00



The global supply chain
disruption following the earthquake and tsunami in Japan has sent shockwaves
through auto makers in China, especially companies that are funded by Japanese
car makers.

Many Japanese carmakers and parts producers have shut down operations
because the disaster on March 11 damaged factories and infrastructure and
caused delays in the shipment of raw materials.

The disaster-stricken northeast region of Japan is a major production base
for auto and electronics components.

Toyota, the world’s largest carmaker, announced on Tuesday that it would
extend the shutdown of its eleven factories until Saturday, the second week
after the catastrophe, in spite of a shortage in auto parts. Honda said that
the production suspension would continue through Sunday.

Nissan, another major Japanese carmaker, resumed parts production at some
plants on Monday and also planned to resume vehicle production on Thursday.
But lingering fears remain over the possibility that the production could be
affected by continued power outages and infrastructure problems.

The joint ventures of the three auto giants in China announced that it
would not halt production in the short term due to their stockpile of auto
parts. But in the mid- and long-term, they might have to reduce or even halt
output if Japanese suppliers fail to ship parts due to the slow recovery.

Managers at Guangzhou Toyota and Guangqi Honda, the two joint ventures with
Guangzhou Automobile Group, said their inventory of auto components could
sustain normal production for two weeks through the end of March.

Dongfeng Nissan and Dongfeng Honda, another two joint ventures, have also
said that they are capable of maintaining normal production until the end of
the month, but warned that disruptions could not be ruled out next month.

A senior executive at a Sino-Japanese automaker told Xinhua that Japanese
car companies get 60 to 70 percent of their parts from China and the remaining
key parts from Japan. “If the parts suppliers in Japan takes too long to
resume production, the joint ventures will be affected,” the executive said.

Some local brands could also face production disruptions because they
receive key components from Japan to boost quality, according to the China
Passenger Car Association.

Some carmakers would run out of stocks at the end of this month, the
association said. If they did not adjust the operation pace, the production of
some models could be halted under extreme circumstances, it said.

“Some domestic auto makers will have to find alternative parts suppliers
from other countries,” said Song Donglin, an economist and the president of
Jilin University of Finance and Economics.

Chinese auto parts makers should learn a lesson from the supply chain
crisis and move up the value chain, experts said.

China’s auto industry should also boost indigenous innovation, particularly
with increasing investment on the research and development of key components,
said Li Junjiang, the head of the School of Economics under Jilin University.

“China has become the world’s largest auto market, but we cannot call it an
auto power,” Li said.

Su Hui, an official at the China Automobile Dealers Association, said that
the disruption could prompt Japanese auto parts producers to move some of
their production to China and also bring opportunities to both local and other
foreign brands as vehicle imports from Japan become affected.


Provide by Vietnam Travel

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