Transaction prices for new vehicles could rise as much as 9% as a result of the Japan earthquake and tsunami, according to a report released today by ALG, which tracks auto industry prices.
As the ongoing Japan disaster unfolds, production disruptions are occurring at a majority of Japanese plants, wreaking havoc with complicated supply chains. Already Japanese makers such as Toyota are trimming or canceling incentives on vehicles imported from Japan. In addition, the supply of used vehicles will decrease and their residual values will increase.
None of this is good news for beleaguered consumers who are now facing the highest gasoline prices in almost three years, as automakers such as Ford quietly raise prices because of increased commodity and energy costs.
The new ALG analysis reveals that while a short 20-day interruption may have little or no impact, longer interruptions equating up to 100 days of vehicle production could cause an 8-9% increase in vehicle pricing on some models and a 0.2 – 0.7% increase in 36-month residual values as a result of changes in future used supply.
“With the eyes of the world focused on recovery efforts in Japan, ALG is carefully measuring the impact this disaster may have on future residual values and current market pricing,” said Eric Lyman, director, Residual Value Solutions, ALG.
“Based on current available data and OEM plans, we believe there will be minimal long term impact, and a short term spike in new car pricing on some models manufactured or sourced from Japan. However, further complications and supply shortages could have a slight positive impact on residual values,” added Lyman.
ALG predicts that a 20-day production delay will cause new transaction prices to rise by approximately 1.5%, except for the Honda Accord. The impact to the Accord is mitigated by the fact that a large share of its production occurs in the U.S.
If Japanese manufacturing interruptions caused by plant shutdowns, supply chain shortages and energy supply issues equate to roughly 100 days of production disruption, ALG forecasts a 0.7% increase in 36-month residuals for the entire Entry Compact segment. This is mainly driven by a reduction in supply of vehicles currently only produced in Japan; for example, the Honda Fit and the Toyota Yaris.
